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UK faces £371bn savings shortfall

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Aberdeen was the fourth most financially resilient city in the UK in 2020. Photo: Getty Images
Aberdeen was the fourth most financially resilient city in the UK in 2020. Photo: Getty Images

Edinburgh, London and Preston were the UK’s most financially resilient cities in 2020, a report has revealed, as it also highlighted that the country is facing a £371bn ($509bn) savings shortfall.

Chart: Yorkshire Building Society
Chart: Yorkshire Building Society

When looking at the UK’s biggest cities, Edinburgh ranked as the most financially resilient, scoring 64 out of a possible 100, according to the Yorkshire Building Society’s "The Nation’s Nest Egg" report.

Milton Keynes was the least resilient, with a score of 44.

Aberdeen, Liverpool and Glasgow were also on the top of the list. Together with Sheffield, Leeds, Southampton and Portsmouth they rounded off the top ten.

London – which had a weakening safety net from 2014 through to 2019 – improved its score the most in 2020, to become the second most financially resilient city, up from 15th place in 2019. 

But Sheffield, which despite growing levels of resilience in 2014-2019, suffered throughout the pandemic. It fell from second place in 2019 to seventh place in 2020.

On a regional level, the East of England proved to be the most financially resilient region, scoring 61 out of 100. This was followed by the Scotland (56) and London (48). The North East proved to be the least financially resilient region, scoring 40.

“In some regions and cities, the increase in financial resilience may have been caused by tougher, longer COVID restrictions being in place, meaning people in those areas were able to save more,” said Nitesh Patel, strategic economist at Yorkshire Building Society.

The research, carried out in partnership with the Centre for Economics and Business Research, found that despite the turmoil of the pandemic, the UK’s overall financial resilience improved over the last year, rising to 57 out of 100, up from 44 in 2019.

This score was determined by assessing shock resilience, probability of income shock, financial health and ability to plan for difficulty.

The report said the UK household savings rate increased from 7% in 2019 to 16% in 2020.

As opportunities to spend were curtailed and many working remotely found a reduction in their outgoings, Britons made additional savings of £190bn over the last 18 months.

Read more: UK's consumer confidence hit as Brits save more and spend less

However, the average UK adult still requires a nest egg of £17,465 to feel financially secure and needs an additional £7,220 to reach this goal.

This means, overall, Britons are facing a £371bn savings shortfall when it comes to feeling able to withstand a financial shock.

“Despite many people managing to put away more money during the past 18 months, this latest research proves just how fragile people’s savings are, and how far away they are from reaching a state where they feel they have sufficient reserves to be financially secure,” said Tina Hughes, director of savings at Yorkshire Building Society.

The shock of the last year has caused many to reassess their attitudes towards savings, and as a result almost half (46%) of 18- to 34-year-olds state they will save more carefully after the pandemic.

A third (32%) of men and almost two-fifths (41%) of women said greater financial security would make them feel less anxious or depressed.

To increase financial resilience, most people would like more money in cash savings (37%), followed by reducing their debt (25%) or owning a property (23%).

Watch: How to prevent getting into debt

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