HL Savings & Resilience Barometer January 2024

• Context
• The study
• Key findings
• Points to consider

Context

Financial resilience, the ability to withstand income shocks in the short and longer term, has been an increasingly important issue following the pandemic and the economic uncertainty it created, and as a result of the ongoing increases in the cost of living. This research and analysis, published for the first time in 2019 and updated every six months, is designed to produce a holistic measure of the state of the nation’s finances. It is structured around five pillars of financial behaviour that are fundamental for households to prudently balance current and future demands whilst guarding against risks: save a penny for a rainy day; protect your family; control your debt; plan for later life; invest to make more of your money.

The study

The analysis draws on data from a number of existing studies. The Wealth and Assets Survey (WAS), published by the ONS, was used as the core dataset but because this source does not include every variable required and the latest survey only extends as far as 2020 Q1, the authors used a range of methods including econometric analysis to build upon the core dataset using data from the Living Costs and Food Survey (LCFS) and the Labour Force Survey (LFS) also published by the ONS and the Financial Lives Survey (FLS) published by the FCA.

The report was produced by Oxford Economics, a commercial advisory service within Oxford University and sponsored by Hargreaves Landsdown (HL), a commercial savings and investment provider.

Key findings

Household financial resilience continued to deteriorate in 2023, albeit at a slower rate than seen in 2022. Overall, resilience levels are still higher now than they were in 2019.

However, this aggregate national picture hides important differences across the five pillars that make up the barometer and across different socio-economic groups

• The significant improvement in the ‘Save a penny for a rainy day’ pillar has driven most of the change in the barometer score over the past four years. Mirroring changes in the savings rate, the pillar’s score increased rapidly during the pandemic and these gains have only partially unwound over the cost-of-living crisis
• Whilst mortgage holders are still being hit by the higher interest rates, renters remain in a far worse position. Those renters who have children, are on the lowest incomes, are not working, are single or are baby boomers are all more vulnerable compared to other renters.
• Savings rates have provided the biggest variation in inputs to barometer scores since 2019. As the economy stabilises further in 2024, the focus should be on ensuring that groups who have eroded their short-term savings are able to rebuild them.

Points to consider

• Methodological limitations: There is an additional methodology document that accompanies the report, available at https://www.hl.co.uk/features/5-to-thrive/savings-and-resilience-comparison-tool. The main limitation that this document notes is that the main data source, the WAS, is not up to date, so the authors have extrapolated using “a wide range of macroeconomic and survey data and different modelling techniques.”
• Relevance: Highly relevant and timely given the ongoing impact of increases in the cost of living.
• Generalisability/ transferability: The research includes British households only, but it is likely that the pandemic and cost of living crisis have had similar impacts elsewhere.
• Applicability: This report will be of interest to government, policy makers, support groups and financial institutions and anyone wanting to understand how British households level of financial resilience is changing and which households are most affected.