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| Households run down savings to record low, says ONS | Households run down savings to record low, says ONS |
| (35 minutes later) | |
| Households ran down their savings to a record low in late 2016, according to official economic growth figures. | Households ran down their savings to a record low in late 2016, according to official economic growth figures. |
| In its third estimate of growth for the final three months of 2016, the Office for National Statistics (ONS) confirmed the UK economy grew by 0.7%. | |
| Economists said that was driven by a rise in consumer spending, helping to offset a fall in business investment. | Economists said that was driven by a rise in consumer spending, helping to offset a fall in business investment. |
| But the figures indicate this spending was funded by households dipping deeper into savings and running up debt. | |
| The savings ratio among households fell to 3.3% in the final three months of last year, the lowest level since records began in the early 1960s, the ONS said. | |
| The ratio has been falling since mid-2015, as consumer spending has risen by more than disposable incomes, it said. | |
| John Hawksworth, chief economist at PwC, said: "On the surface, today's national accounts data reconfirmed the earlier picture that the UK economy remained relatively robust in the second half of 2016 following the Brexit vote. | John Hawksworth, chief economist at PwC, said: "On the surface, today's national accounts data reconfirmed the earlier picture that the UK economy remained relatively robust in the second half of 2016 following the Brexit vote. |
| "Beneath the surface though, some more worrying signs are evident." | "Beneath the surface though, some more worrying signs are evident." |
| Among them is that household net borrowing in the fourth quarter rose to over £11bn, the highest quarterly level in nearly 30 years, he said. | |
| 'Tough year' | |
| Darren Morgan, head of GDP at ONS, said: "Although household spending rose at the end of last year, there was a noticeable worsening in people's perception of the general economic situation and their own financial position." | |
| The UK's economy last year defied forecasts that it would slow sharply after the vote in June to take the country out of the European Union. | |
| However, inflation has gathered pace in recent months, driven in part by the fall in the value of sterling since the Brexit vote. | |
| With prices rising and wage growth slowing, 2017 was "likely to be a very tough year for the consumer", said Martin Beck, senior economic advisor to the EY Item Club. | |
| The Bank of England has predicted that weaker incomes will result in a "significant fall" in the saving ratio over the next three years. | |
| Analysis, Jonty Bloom, business correspondent | |
| The British economy continued to grow strongly at the end of last year boosted by the dominant services sector and increasing exports. | |
| That meant that growth for the whole year was a respectable 1.8%. | |
| The two key factors were the fall in value of the pound which has helped British exporters to boost exports by 4.6% and by strong consumer spending that has kept the services sector of the economy performing well. | |
| Household spending rose by 0.7% in the last three months of 2016 alone. But there are signs that may not continue for long; inflation is now rising at almost the same rate as wages and that is likely to squeeze spending power, while households have few savings to fall back on. | |
| The savings ratio at 3.3% is already at its lowest level since records began in 1963. |