If Britain falls into recession soon, perhaps after a no-deal Brexit, it might p...
LONDON - If Britain falls into recession soon, perhaps after a no-deal Brexit, it might prove to be a lengthy one because the country’s financially stretched households are unlikely to be able to lead a recovery.
Households have also been net borrowers for 10 quarters in a row, an unprecedented stretch in records dating back to the 1960s. Bank of England policymaker Gertjan Vlieghe has said he was “concerned” that the low household savings rate could leave households vulnerable to shocks to their income or employment.Many factors determine how quickly a country recovers from a recession, and the household savings rate appears to be an important one.
By contrast, Spain, Portugal and Finland took longest to recover — around nine to 10 years — and had household savings rates furthest below their 10-year average in 2007. The world’s fifth-biggest economy shrank in the second quarter of 2019 and the possibility of a no-deal Brexit has raised the risk of its first recession since the financial crisis, even if some of those concerns were eased last week when data showed output grew in July more strongly than expected.
Britain’s household savings ratio stood at 4.2% in 2018, up only slightly from the record low of 3.9% struck in 2017.
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