In the latest ILC-UK Economic Insight paper, we analyse what the 2016 Autumn Statement means for savings and conclude with a short discussion about UK savings policy.

The 2016 Autumn Statement, delivered by Chancellor Philip Hammond on Wednesday, 23rd November 2016 outlined the state of the UK’s economy and public finances in the wake of the vote to leave the EU. In this note we briefly analyse what this means for savings and conclude with a short discussion about UK savings policy.

Key facts and figures based on ILC-UK analysis

• By 2022, economic output per person will be over 25% smaller than we would have expected it to be before the crisis. This economic weakness has impacted on household finances.
• Real wages will be £11,600 (or 31%) below what we would have expected them to be before the crisis. This has made it harder to save.
• Bank Rate is expected to remain firmly in the zero lower bound, while returns on long dated government bonds are likely to remain at historically low levels. This means savings will not go as far.
• The household savings ratio has been falling and is expected to remain low up to 2022. This is despite the continued roll out of automatic enrolment.

Overall verdict

Generally bad economic news for savers, but this does not mean the government should shy away from its long run objective of supporting private savings through automatic enrolment. Government needs to think carefully about how to square the circle and deliver savings policy which is aligned to its economic and fiscal objectives.