‘Incredibly prudent' Britons saving more than Germans

Telegraph

6 hours ago

British households are saving more than their German counterparts for the first time in five years in a remarkable reversal of pre-pandemic trends, new analysis has found.
Britons are currently putting money away for a rainy day at a faster rate than they were before the pandemic hit, according to JP Morgan Asset Management.
Relative to Germans and Americans, Brits are the only ones still saving far more than before the pandemic, the fund manager said.
'We still have all of our pandemic-related savings. Our consumer has been incredibly prudent for five years now,' said Karen Ward, chief market strategist. 'We are currently saving more than Germany, which you wouldn't have said for probably decades. This is where the UK is really interesting.'
The funds group said Britons now had a mindset of 'take care of the pennies and the pounds will take care of themselves' after decades of lower savings rates in the UK.
Savers in the eurozone are still saving more than before Covid too, but the jump has been less pronounced than among Britons. In contrast, Americans are saving much less than before the pandemic
The higher savings rate means British families are sitting on significant spending firepower, which could be unleashed to boost struggling growth rates.
In contrast, high levels of consumption in the US have helped the economy grow at an impressive rate since the pandemic – but are now looking fragile in the face of more worried households.
'If we can restore confidence, then we do actually have some pot of money in the household sector that could support the recovery. I think that's a forgotten feature, whereas the US has spent those excess savings,' Ms Ward said.
'We're revising down our expectations for nominal growth in the US. We're actually maintaining, if not nudging up, our thoughts about nominal growth in Europe.'
Restoring consumer confidence
Unleashing these significant household savings hinges on restoring confidence among families after years of surging energy bills, mortgage rates and grocery costs.
The UK faces a greater challenge from stubborn inflation than the eurozone and the US, Ms Ward warned.
She blamed Britain's worklessness crisis and a clampdown on immigration for threatening to keep inflation high.
Ms Ward said: '[Britain's inflation problem] is the worst. It's the fact that it's coming from our labour market. We know the big difference between the UK and elsewhere is our participation rate is still lower than it was pre-pandemic. There are lots of different reasons for it, long-term sickness is one of them.'
Ms Ward, who has advised former chancellors Jeremy Hunt and Philip Hammond, also warned that Rachel Reeves may be forced to break one of Labour's manifesto pledges at the autumn Budget. The Chancellor has previously vowed not to raise income tax, employees' national insurance or VAT.
She said: 'The biggest risk is that the Office for Budget Responsibility makes a structural change to its productivity assumption. This might require either a rewrite of spending plans or resorting to one of the big taxes that had been ruled out in the manifesto.'
Asked whether Sir Keir Starmer's u-turn on winter fuel payments and other giveaways was a mistake because of the tight fiscal outlook, she added: 'Markets are looking for a credible fiscal plan and signs that the Government can have a reasonable conversation with its electorate about the difficult choices it faces.'