Belfast Telegraph

Saving and spending on decline, new figures claim

By Staff Reporter

Savers left a £1bn dent in cash Isas in July as they shored up money in their accounts at the slowest rate seen in over eight years, according to a high street banking report.

Pressure on household budgets is reducing both saving and spending, trade association UK Finance said.

Its figures show annual growth in personal deposits stood at 2.3% in July - the slowest rate seen since May 2009. The figures include money held in current accounts, Isas and other savings accounts.

Within the scope of personal saving, there was a net outflow of £1bn from cash Isa deposits with high street banks in July.

UK Finance said changes to tax rules, which allow savers to earn interest tax-free in non-Isa accounts as well as in Isas, have "reduced the attraction of saving in Isas".

By contrast, deposits by non-financial companies are growing by 7.5% annually, as firms hedge against uncertain trading conditions.

Households have been seeing their budgets squeezed by rising living costs and stagnant wages, prompting concerns that some could be at risk of becoming too reliant on credit.

Howard Archer, an economist at EY ITEM Club, suggested the figures could be evidence that growth in consumer borrowing has peaked, in the light of other recent reports suggesting banks have become more cautious in their lending behaviour.

Mr Archer said previous figures have shown annual growth in credit card lending at higher rates in recent months.

"It may well be heightened uncertainties over the outlook and increased concerns over personal finances are encouraging some consumers to be more cautious in their borrowing," he said.

Belfast Telegraph