British households saved less in the three months from July to September as they felt the hit from higher taxes but still increased their spending, according to official data from the Office for National Statistics (ONS). The figures also confirmed a broader slowdown in the UK economy.
The UK’s gross domestic product grew by just 0.1% in the third quarter, matching the ONS’s initial estimate and forecasts from economists surveyed by Reuters. Growth in the April-to-June period was revised down to 0.2% from a previous estimate of 0.3%.
The ONS said the household saving ratio fell by 0.7 percentage points to 9.5%, its lowest level in more than a year. Real household disposable incomes were squeezed by tax increases and inflation, outweighing income growth. Despite this, household consumption rose 0.3% from the second quarter, marking the fastest quarter-on-quarter increase in a year, after no growth in the previous quarter.
Finance Minister Rachel Reeves introduced higher taxes in her first budget in 2024, including measures on certain forms of wealth income. While most of the burden fell on employers, households still felt the impact on disposable incomes.
The UK had been among the fastest-growing economies in the first half of 2025, alongside Japan, but the pace has slowed sharply in recent months. Economic uncertainty intensified in the run-up to Reeves’ second budget, announced on November 26, which contributed to restrained growth in household spending and investment.
“The breakdown in growth in Q3 was a bit less reliant on government spending than in the first estimate,” said Alex Kerr, UK economist at Capital Economics. He added that the data confirmed a slowdown after a strong start to the year. Capital Economics now expects GDP growth of 1.0% in 2026, down from 1.4% in 2025.
Year-on-year, the UK’s GDP in the third quarter was 1.3% higher than a year earlier, unchanged from the initial estimate. On a per capita basis, output increased 0.9% over the same period.
The current account deficit narrowed to £12.1 billion in the three months to the end of September, or 1.6% of GDP, compared with 2.8% in the second quarter and a Reuters forecast of £21.1 billion. Revisions to the data showed that income flowing into the UK from foreign direct investment held abroad was higher than previously thought, while earnings in Britain by foreign investors were revised down.
Economists say the figures suggest households are continuing to support the economy through spending even as saving rates decline, but the combination of tax pressures, inflation, and economic uncertainty is likely to weigh on growth in the coming months.
