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(Bloomberg) — Britons put away less in savings in the first quarter as households spent more on going out and inflation pushed up living costs in the run up to the Iran war.
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The saving ratio — the proportion of disposable incomes saved rather than spent — fell to 8.9% in the first quarter, down from 9.6% in the previous quarter, the Office for National Statistics said on Tuesday.
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The fall was driven by higher spending on housing, utilities, restaurants and hotels, the ONS said.
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Part of the increase in spending is likely to be driven by prices rising in the first quarter, while incomes were flat. It meant real household disposable income per head fell 0.8% in the first quarter.
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“The household saving ratio continued to ease at the start of 2026 but remains above its pre-pandemic levels,” said Liz McKeown, ONS director of economic statistics.
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Britons have been saving far more of their incomes since the pandemic after being hit by a series of economic shocks and high inflation. That has been a major drag on the country’s growth rates and has diverged sharply from the less cautious attitude of US consumers.
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Final consumption expenditure rose 1.4% in the first quarter, while total resources adjusted for pension savings rose just 0.7%. Underlying gross disposable income was unchanged, and prices rose 0.8%.
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The ONS also confirmed that the UK economy enjoyed a growth spurt in the first quarter, with output expanding by an unrevised 0.6%. However, it slightly downgraded growth for 2025 as a whole to 1.3%, down 0.1 percentage point.
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Forecasters expect the economy to slow sharply in the second quarter as the conflict in the Middle East sapped confidence and sent energy costs soaring. However, the outlook is brightening again after the US-Iran truce that is expected to mean a lower peak for UK inflation.
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The IMF and OECD had expected the UK to be among the worst-affected advanced economies by the war. The deal to halt the conflict has led to a sharp drop in oil prices, prompting traders to rein in bets on interest-rate hikes by the Bank of England to contain the surge in inflation.
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The stronger outlook is a boost for Andy Burnham, the former Greater Manchester mayor who is widely expected to succeed Keir Starmer as Prime Minister following his resignation earlier this month.
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Burnham started to sketch out his plans for governing on Monday, vowing to move fiscal powers out of London, revive British high streets and tackle the country’s welfare bill.
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