Average families have been net borrowers since just after Brexit referendum, says ONS

British households have spent more than they received for an unprecedented nine consecutive quarters amid a longer squeeze on real incomes, according to official figures.

Households across the country have been net borrowers in every quarter between October 2016 – when living costs started to rise after the Brexit vote – and December 2018. The Office for National Statistics said the run of nine quarters was unprecedented on comparable records dating back to 1987.

Household finances had been under pressure since before the EU referendum amid sluggish wage growth since the 2008 financial crisis, while cuts to benefits imposed under austerity have also damaged incomes. Average real wages remain below the peak recorded in 2007.

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However, the ONS said there had been a noticeable hit to family finances in the wake of the Brexit vote, when the sudden drop in the value of the pound drove up the price of imports to Britain, pushing up inflation.

“This in part reflects the effect of a squeeze in purchasing power from higher import inflation following the fall in the exchange rate after the referendum on membership of the EU,” the ONS said.

Household net borrowing was 0.6% of GDP in the fourth quarter of 2018, continuing the trend of families living beyond their means. The position was, however, an improvement on the third quarter when net borrowing was 1.1%, which the ONS said reflected gradual increases in real wage growth.

The household savings ratio – which estimates the amount of money households have available to save as a percentage of their total disposable income – increased modestly to 4.2% for 2018 from a record low of 3.9% in 2017, in a sign that families are gradually getting back on their feet.

Despite this, the ONS said the gauge was still low by historical standards, with the ratio in 2017 and 2018 the lowest since records began in 1963.

Before the latest run of nine consecutive quarters of living beyond their means, the ONS said there were only two previous occasions when British households had been net borrowers since 1987.

The first was for three quarters during the mortgage boom of the late 1980s under the then Conservative chancellor Nigel Lawson, between the third quarter of 1988 and first quarter of 1989 – just ahead of the early 1990s recession that followed.

The second time was for one quarter in the first three months of 2006, in the run-up to the global financial crisis.

The latest snapshot from the ONS also showed that the UK’s balance of payments deficit – the shortfall between money flowing in and out of the country – got bigger in the last few months of 2018.

The balance of payments was negative by £23.7bn in the fourth quarter, compared with £23bn in the third quarter.

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Other statistics from the ONS showed that Britain had the weakest investment growth of any G7 nation, with an expansion in spending on technology, machinery, transport equipment, dwelling and intellectual property of just 0.2%.

It said the weak performance came as business investment fell in every quarter of the year, the first time this has happened since the last recession. It comes as firms put investment decisions on hold amid Brexit uncertainty, laying the ground for weaker economic growth in future.

The ONS confirmed previous estimates that the British economy grew by 0.2% in the fourth quarter. Growth for 2018 as a whole was, however, revised upwards slightly to 1.4% from the previous estimate of 1.3%.