UK households sharply increased the proportion of income they saved through 2022 and into 2024, raising questions about the sustainability of consumption-led growth and offering a cautionary tale for the United States.

According to official data, the household savings ratio in the UK rose from around 6.6 per cent in the second quarter of 2022 to roughly 11.1 per cent by the first quarter of 2024. The higher rate was driven by elevated inflation, steep interest-rate rises and slack spending, signalling a shift from Britain’s pre-pandemic consumption-driven model.

This shift coincided with a sharp loss of pension wealth and bond valuations, particularly for households near retirement, as yields rose and asset values fell.

Analysts at firms such as Peel Hunt suggest that this “wealth shock” created deeper caution among savers: rather than spending, many chose instead to hoard cash or cut back on discretionary outlays.

That dynamic blunts aggregate demand, weighing on economic growth.

In the United States, where consumer spending has long been the dominant growth engine, the British pattern raises caution.

If US households similarly pull back—whether motivated by rising yields, shrinking asset values or heightened uncertainty—the result could be slower growth and more persistent disinflationary pressure.

Some economists point to the UK’s experience as a leading indicator of what may lie ahead beyond the Atlantic.

While elevated savings can support balance sheets in the short term, the UK case suggests the longer-term risk is weaker consumption, slower investment and reduced growth.

The lesson for policymakers is that rising household caution around wealth and income may translate into macro-economic drag—even in large, open economies.

Monitoring the translation of high savings ratios into lower spending will be key to assessing global growth trajectories.