In 2016, the households saving ratio was 7.0%.
In Quarter 2 (Apr to June) 2017, the households saving ratio was 5.4%, which is an increase to a level similar to Quarter 4 (Oct to Dec) 2016; the saving ratio of 3.8% in Quarter 1 (Jan to Mar) 2017 was unusually low due to the timing of certain taxes.
Large revisions due to new methods have increased households income and decreased private non-financial corporations’ net lending.
Real households disposable income growth has been revised up to 5.6% in 2015 and down to 0.1% in 2016, as dividend income was brought forward from 2016 in anticipation of increasing taxes on dividends.
Available for the first time, the households account has been separated from the non-profit institutions serving households account, enabling analysis of the households sector alone.
Understanding the sector and financial accounts
This bulletin presents UK aggregate data for the main economic indicators and summary estimates from the institutional sectors of the UK economy: private non-financial corporations, public corporations, financial corporations, central and local government, households, non-profit institutions serving households (NPISH) and the rest of the world sector, that are presented in the UK Economic Accounts (UKEA) dataset.
In September 2017, the households and NPISH sectors are published separately for the first time. Previously they were published as a combined sector. Indicators such as the households saving ratio and real households disposable income now come from the separated households-only sector.
This bulletin uses data from the UKEA. The UKEA provides detailed estimates of national product, income and expenditure, UK Sector Non-financial and Financial Accounts and UK Balance of Payments. These accounts are the underlying data that produce a single estimate of gross domestic product (GDP) using income, production and expenditure data.
The sector accounts are fully integrated, but with a statistical discrepancy, shown for each sector’s account. This reflects the difference between a sector’s net lending or net borrowing from the non-financial account and the net lending or net borrowing from the financial accounts, which should theoretically be equal but differ due to different data sources and measurement practices.
Data in this bulletin are internationally comparable. The UK National Accounts are compiled in accordance with the European System of Accounts: ESA 2010, under EU law and in common with all other members of the European Statistical System. ESA 2010 is itself consistent with the standards set out in the United Nations System of National Accounts 2008: SNA 2008.
An explanation of the sectors and transactions described in this bulletin can be found in chapter 2 of the European System of Accounts 2010: ESA 2010 manual.
Estimates within this release
This bulletin includes new data for the latest available quarter, Quarter 2 (Apr to June) 2017. Many methods improvements and new data sources have been incorporated into the national accounts for Blue Book 2017. This bulletin and the UKEA dataset contain revisions consistent with Blue Book 2017 from 1997.
This bulletin follows the National Accounts Revisions Policy.
All data within this bulletin are estimated in current prices (also called nominal prices), with the exception of real households disposable income, which is estimated in chained volume measures.
Current price series are expressed in terms of the prices during the time period being estimated. These describe the prices recorded at the time of production or consumption and include the effect of price inflation over time. Chained volume measure price series (also known as real terms) remove the effect of price inflation.
All figures given in this bulletin are adjusted for seasonality, unless otherwise stated. Seasonal adjustment removes seasonal or calendar effects from data to enable more meaningful comparisons over time.
Population estimates published in this bulletin are consistent with those published on 22 June 2017 in the Population Estimates for UK, England and Wales, Scotland and Northern Ireland publication.
Real household disposable income (RHDI) explained
Household income is measured in two ways: in current prices (also called nominal prices) and in real terms, where the effect of price inflation is removed.
Gross disposable household income (GDHI) is the estimate of the total amount of income that households have available; that is, from wages received, income of the self-employed, social benefits, pensions and net property income (earnings from interest on savings and dividends from shares) less taxes on income and wealth. These are given in current prices. Gross disposable income tells us how much income households have to spend, save or invest in the time period being measured (quarter or year) once taxes on income and wealth have been paid.
Adjusting GDHI to remove the effects of inflation gives another measure of disposable income called real household disposable income (RHDI). This is a measure of the real purchasing power of household incomes, in terms of the physical quantity of goods and services they would be able to purchase if prices remained constant over time. To remove the effect of price changes on the current price GDHI data we use the most relevant national accounts price deflator: the households final consumption implied deflator. This divides total current price households final consumption by total chained volume measure household final consumption to derive a price index.
GDHI is then divided by this price index to remove the effects of price inflation. In other words, RHDI enables a comparison over time of how much households have to spend, save or invest once taxes on income have been paid, by supposing a given amount of money could buy the same amount of goods and services in each time period.
The households saving ratio explained
The saving ratio estimates the amount of money households have available to save (known as gross saving) as a percentage of their disposable income.
Gross saving is the difference between households’ total available resources (mainly wages received, revenue of the self-employed, social benefits and net income such as interest on savings and dividends from shares, but deducting taxes on income and wealth) and household consumption (expenditure on goods and services for consumption).
The saving ratio can be volatile and is sensitive to even relatively small movements in its components, particularly on a quarterly basis. This is because gross saving is a relatively small difference between two large numbers. It is therefore often revised at successive publications when there are revisions to data. The households saving ratio is seen as an indicator of household financial conditions. A low saving ratio may imply that households are taking on more debt and acquiring fewer financial assets, such as pensions. Instead household income is spent on consumption. A higher saving ratio may imply that households are acquiring more assets and taking on less debt.
Estimates for the most recent quarters are provisional and are subject to revision in the light of updated source information. Our revisions to economic statistics page contains articles on revisions and revisions policies.
Revisions to data provide one indication of the reliability of main indicators. Revisions triangles are published on our website for the households and non-profit institutions serving households saving ratio.
Who uses these data?
The data used in this bulletin have a broad range of users. They are widely used by government departments to inform and monitor the effect of policy decisions. The data also aid assessments of the economy: such as informing the Bank of England’s Monetary Policy Committee (MPC) when setting monetary policy and the Office for Budget Responsibility’s (OBR) forecasts and evaluations of economic growth and public sector finances. Theoretical and policy debate is also supported by UKEA data at knowledge and research institutions such as think-tanks, lobby groups and universities by researchers, analysts, academics and students. Sector and financial accounts data is also used by analysts in the private sector.Back to table of contents
Figure 1 shows sector net lending and net borrowing for the UK economy, following upward revisions to the households sector and the rest of the world, and downward revisions to the private non-financial corporations sector. In line with previously published data, the rest of the world is a consistent net lender to the UK, while the government has been a net borrower from the other sectors from Quarter 4 (Oct to Dec) 2001 onwards.
The households sector was a net lender up to Quarter 4 2016. The increase in net lending from 2008 was due to a fall in final consumption expenditure and an increase in net social benefits and contributions. In 2016, the fall in households sector net lending was due to an increase in final consumption expenditure greater than an increase in income.
The corporations sector has been a net borrower since Quarter 3 (July to Sept) 2012, however, the net lending position of corporations has varied.
For the first time, the households sector is published separately from the non-profit institutions serving households sector (NPISH). Previously the two sectors were published combined. NPISH includes charities and universities, along with a variety of other institutions. The NPISH sector average net lending 1997 to 2016 was £4.9 billion per year, which is small compared with the other institutional sectors.
In Quarter 2 (Apr to June) 2017, the households sector net borrowing was £1.2 billion, which was relatively small compared with total income and expenditure: in the same quarter the households sector received £251 billion from compensation of employees, £75 billion from gross operating surplus and mixed income, £48 billion in net property income paid on financial assets and land and £13.8 billion from net social benefits and contributions; households paid £319 billion in consumption expenditure, £56 billion in taxes on income and wealth and £18 billion in gross capital formation. Net receipts of £3.5 billion in other transactions leave net borrowing of £1.2 billion.
New data sources and methods have caused a large upward revision in households sector income and a downward revision to non-financial corporations sector income. In particular, the accounts better capture the income of the self-employed who have incorporated and receive income as dividends. Figure 2 shows the revision to the level of dividend receipts by the households sector after the methods change, compared with the previously published level of households and NPISH dividend receipts. More detail on the dividends methods changes and data sources is available in a separate article.
The upward revision in income for the households sector has meant a downward revision in income from other sectors, mainly from the private non-financial corporations (PNFC) sector. PNFC dividend payments were revised upwards by £51.0 billion in 2016. This is a large revision relative to the income of the sector; for example, total UK PNFC sector gross operating surplus in 2016 was £354 billion). PNFC gross capital formation has also been revised upwards by on average £4.9 billion per year 1997 to 2016, causing further downward revision to PNFC net lending or net borrowing. The contributions to the downward revision to PNFC net lending or net borrowing are shown in Figure 3.
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The large upward revision to households sector income has also caused a revision to the households saving ratio and households gross saving. Household gross saving is the numerator in the saving ratio and is calculated as unconsumed household income, so an increase in gross income also increases gross saving.
While consumption expenditure has also been revised up, reducing gross saving, the upward revision to income is larger. Figure 4 shows the households saving ratio compared with the previously published households and NPISH saving ratio. Figure 5 shows the revisions to gross saving for the combined households and NPISH sector from what was previously published.
In 2016, dividend income from corporations was revised upwards by £53.6 billion. This was partially offset by an upwards revision to final consumption expenditure of £28.1 billion and revisions to other transactions totalling £4.6 billion, leading to an upwards revision to gross saving of £30.1 billion.
Consequently, the households and NPISH saving ratio in 2016 was revised upwards to 7.1% from 5.2%. Removing the NPISH sector gives a saving ratio for households of 7.0% in 2016.
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Previously, the households sector account was published combined with the non-profit institutions serving households (NPISH) account. For the first time we are publishing the households account separately. However, the NPISH sector is small and changes in the households-only saving ratio are similar to changes in the previously published households and NPISH saving ratio.
The households saving ratio increased in Quarter 2 2017 to 5.4%. This was caused by a reduction in taxes on income and wealth of £2.6 billion, which fell back after the increase in taxes in Quarter 1 (Jan to Mar) 2017. It was also due to a rise in wages and salaries of £2.0 billion, mostly offset by a rise in final consumption expenditure of £1.5 billion.
In Quarter 1 2017, the households saving ratio fell 1.4 percentage points to 3.8%, from 5.2% in Quarter 4 (Oct to Dec) 2016. This fall was due to an increase in final consumption expenditure of £3.5 billion and an increase in taxes on income and wealth of £3.4 billion. Part of the increase in taxes on income and wealth was due to timing, as taxes on self-reported income and capital gains are paid in the first quarter. The saving ratio recovered in Quarter 2 2017, as taxes fell back to closer to the value in Quarter 4 2016.
Figure 6 shows the contributions to the change in households sector gross saving for the latest quarters. In 2016 and Quarter 1 2017, growth in final consumption expenditure was strong, and drove a fall in the households saving ratio as income grew at a slower rate. Growth in final consumption expenditure averaged £3.5 billion per quarter from Quarter 1 2016 to Quarter 1 2017, compared with an average increase of £2.4 billion per quarter over the previous five years.
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The UK households saving ratio in 2016 was 7.0%. This is relatively low compared with the rest of the European Union: for the 28 European Union member states, the households and non-profit institutions serving households (NPISH) saving ratio in 2016 was 10.3%. For the eurozone, the households and NPISH saving ratio in 2016 was 12.2%.
However, the UK households saving ratio was higher than the households saving ratio for the US, which was 4.9%. In Quarter 2 (Apr to June) 2017, the UK households saving ratio was 5.4%, compared with 3.7% for the US.
After the improvements to methods, the UK saving ratio was at a similar level to the Spanish households and NPISH saving ratio, up to Quarter 1 (Jan to Mar) 2017, when the UK households saving ratio became similar to the US households saving ratio. The Spanish households and NPISH saving ratio also followed a similar path to the UK households saving ratio, increasing in 2009 then decreasing.
Figure 7 shows the UK saving ratio compared with other countries. The households and NPISH saving ratio for the eurozone has significant divergence between the constituent countries. For instance, France and Germany have higher households saving ratios than Spain and Italy.
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The households account has now been separated from the previously published combined households and non-profit institutions serving households (NPISH) account. We now publish real household disposable income (RHDI) growth for the households sector separately.
RHDI growth was 1.6% in Quarter 2 2017. This was due to a rise in nominal gross disposable income of 1.9%, partially offset by a rise in the household consumption deflator of 0.2%.
Figure 8 shows the revisions to RHDI growth, comparing the currently published RHDI growth series with the previously published real households and NPISH disposable income growth series. RHDI growth was 5.6% in 2015 and 0.1% in 2016. Previously published real households and NPISH disposable income growth was 3.6% in 2015 and 1.5% in 2016.
The revision is caused mainly by changes to dividends in new data sources. Taxes on dividends increased in 2016. This caused forestalling as dividends were brought forward and paid in 2015 rather than 2016 under higher taxes. New methods and sources introduced into the national accounts have increased the coverage of dividend payments and picked up a greater effect on household income from forestalling dividends.
Household dividend income from corporations grew by 40% between 2014 and 2015 and fell by 16% between 2015 and 2016. Total nominal gross disposable income growth in 2015 was 6.2%. The previously published increase in dividend income from corporations for households and NPISH combined sector was only 4% between 2014 and 2015.
The revision to RHDI growth in 2015 was partially offset by a revision of the households and NPISH consumption deflator to 0.6% from the previously published 0.3%. The change to a household only consumption deflator did not affect the value in 2015.
In 2016, RHDI growth was 0.1%, due to nominal household gross disposable income growth of 1.5% that was mostly offset by the household consumption deflator at 1.4%. This was revised up from the previously published households and NPISH deflator of 1.2%.
There is a small effect from removing the NPISH sector. In 2016, for the sectors combined on the previously published basis, real households and NPISH gross disposable income growth was 0.3%, higher than for households alone. This was based on households and NPISH gross disposable income growth of 1.7%, higher than for the households sector alone and households and NPISH final consumption deflator of 1.4%, the same as for the households sector alone.
However, the NPISH sector is small and does not diverge from the growth of household income. From 1997 to 2017, the average difference between quarterly RHDI growth and combined sector real households and NPISH disposable income growth is 0.0 percentage points.Back to table of contents
The households debt-income ratio, defined as the ratio of total households sector loans and liabilities and the previous four quarters of household gross disposable income, reached its low point in Quarter 4 (Oct to Dec) 2015 and has been rising since. Figure 9 shows the path of the households debt-income ratio. High debt relative to income is seen as an indicator of slower future economic growth.
The households debt-income ratio increased on average by 1.0 percentage point per quarter from Quarter 1 (Jan to Mar) 2016 to Quarter 2 (Apr to June) 2017. Over the six quarters, households loans liabilities increased by 6%, while households gross disposable income increased by 2.4%.This compares with the period of reduction in the households debt-income ratio after 2008.
Between Quarter 3 (July to Sept) 2008 and Quarter 4 2015, the households debt-income ratio fell by 0.7 percentage points per quarter, on average. While this was a fall in the relative debt burden, households loans liabilities rose by 9.1% over the period. However, gross disposable income increased by 27% over the period.
This was a slower rate of growth in the households debt-income ratio than during the previous period of increase. From Quarter 2 2001 to Quarter 2 2008, the debt-income ratio increased by on average 1.9 percentage points per quarter. Loans liabilities more than doubled, increasing by 105%, while gross disposable income increased by 32%.Back to table of contents
This Quarterly sector accounts bulletin is currently the subject of a review by the Office for Statistics Regulation to determine its designation as a National Statistic. National Statistics are produced to high professional standards set out in the Code of Practice for Official Statistics. They undergo regular quality assurance reviews to ensure that they meet customer needs. They are produced free from any political interference.Back to table of contents
We are currently developing the Quarterly sector accounts bulletin Quality and Methodology Information report. This will be published shortly and will contain important information on:
- the strengths and limitations of the data and how it compares with related data
- uses and users of the data
- how the output was created
- the quality of the output including the accuracy of the data
The Quarterly sector accounts and the UK Economic Accounts are published at quarterly, pre-announced intervals alongside the Quarterly national accounts and Quarterly balance of payments statistical bulletins.Back to table of contents
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