Brexit: British people are stashing away cash ready for a tougher economic year and lower wage growth

Savers have put away far more money this year suggesting they are preparing for a period of economic uncertainty

Zlata Rodionova
Thursday 29 December 2016 12:32 GMT
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Personal deposits grew £32.4bn over first 11 months of 2016 as people prepared for slower wage growth
Personal deposits grew £32.4bn over first 11 months of 2016 as people prepared for slower wage growth (Shuttercock)

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Louise Thomas

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Britons are stashing away cash and building up their savings at increasing rates in a sign that households are bracing themselves for a Brexit related slowdown.

Personal deposits rose by 4.8 per cent in November, according to the latest figures from the British Bankers Association, as consumers prepared themselves for a tougher economic year and lower wage growth.

In the first 11 months of 2016, personal deposits grew by £32.4bn collectively, compared with a £19.8bn increase over the same period in 2015.

Meanwhile, the rate of growth in people’s borrowing on credit cards, overdrafts and personal loans has slowed down, despite strong retail sales, the BBA said.

Rebecca Harding, chief economist at the BBA, said: “A corollary of a low interest rate environment is a growth in deposits and we’ve seen personal deposits, in particular, grow more strongly in recent months as consumers hoard cash in the absence of higher-yielding, liquid investment opportunities.”

“This growth in personal deposits may also suggest that consumers are looking to grow their cash reserves against potential economic uncertainties, such as an expectation of lower wage growth.”

British savers were shaken by the vote to leave the EU in June, which prompted the Bank of England to cut interest rates to a record-low 0.25 per cent.

In July, the International Monetary Fund (IMF) cut its 2017 GDP forecast for the UK from 2.2 per cent to 1.3 per cent. It trimmed its forecast further to 1.1 per cent in October, as uncertainty surrounding Britain’s future outside of the EU continued to grow.

Meanwhile, inflation has hit its highest level in more than two years thanks to the sharp fall in the value of the pound since the Brexit vote, according to the latest prices report from the Office for National Statistics.

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