Yorkshire Building Society launches the nation's nest egg report revealing £371BN UK Savings shortfall

• Britain faces £371 billion savings shortfall according to Yorkshire Building Society’s The Nation’s Nest Egg report
• Despite bumper stay-at-home savings boost, the average Briton needs to add £7,000 to their nest egg to feel financially secure
• The full The Nation’s Nest Egg Report can be read here.

Consumers are currently facing a £371 billion savings shortfall[1] when it comes to feeling able to withstand a financial shock, according to Yorkshire Building Society’s The Nation’s Nest Egg report.

The report, which was conducted in partnership with the Centre for Economics and Business Research (Cebr), finds that despite Covid-19 restrictions helping many people to increase their savings pot, UK adults require a nest egg of £17,465 to feel financially secure with the average Briton needing an additional £7,220 to reach this goal.

The study seeks to analyse consumers’ financial resilience – their ability to withstand financial shocks and how that impacts their behaviour. It reveals that despite the turmoil of the pandemic, the UK’s overall financial resilience has improved over the last year, rising to 57 out of 100, up from 44 in 2019. This score has been determined by assessing four key pillars which can be considered together to present an overall picture of financial resilience: shock resilience, probability of income shock, financial health and ability to plan for difficulty.^[2]

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

People have also become aware of the impact that money worries can have on their wellbeing, with a third (32%) of men and almost two-fifths (41%) of women stating that greater financial security would make them feel less anxious or depressed.

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

Despite the year-on-year improvement in the nation’s ability to cope with income shocks, Yorkshire Building Society believes more needs to be done to help people to build their financial wellbeing through savings, particularly in light of this new analysis.

Tina Hughes, director of savings at Yorkshire Building Society said:

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. Whilst some people were able to save throughout the pandemic, that hasn’t been the case for everyone, with many now more exposed than before to financial shocks.

As a society we know how difficult it is for people up and down the country to save towards their nest egg, and we are committed to helping more individuals build their financial resilience. Money worries can have a detrimental impact on people’s wellbeing and so we are here to help them in times of need.

However, it’s positive to see that overall, the UK’s financial resilience has improved, and it’s hoped that as we emerge from the pandemic those who have been able to increase their savings, will maintain these good money habits and grow their savings safety nets.

Nitesh Patel, strategic economist at Yorkshire Building Society said:

The country has been battling the impacts of the pandemic for the last 18 months, and we can now paint a comprehensive picture of how the crisis has impacted the nation’s financial resilience. We know that people’s opportunities to spend have been curtailed whilst many who have been working remotely have found a reduction in their outgoings. This has resulted in additional savings of £190bn over the last 18 months.  

However, whilst the overall UK household savings rate may have increased from 7% in 2019 to 16% in 2020, there are still pockets of society who have been more significantly impacted than others, and therefore are more likely to be in need of financial support and education on how to improve their financial situation.

The changes in the city and regional rankings are perhaps reflective of the different lockdown restrictions that were implemented up and down the country. 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. However, this theory isn’t necessarily reflective across all regions.

As the economy gets back on its feet, its essential that we remember that many people have been made more financially vulnerable by the impacts of the pandemic, and as a Society we are here to help them in their time of need.

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.

When looking at the UK’s biggest cities, Edinburgh ranked as the UK’s most financially resilient, scoring 64, out of a possible 100. Whilst Milton Keynes proved to be the least resilient scoring 44.  

However, compared to the past five years, the pandemic has significantly altered many cities financial resilience score. Most notably, London – which had a weakening safety net from 2014-2019 – improved its financial resilience the most in 2020, to become the second most financially resilient city, up from 15^th place in 2019. The opposite held true for Sheffield, which despite growing levels of resilience in 2014-2019, suffered significantly throughout the pandemic, resulting in a fall from 2^nd place in 2019 to 7^th place in 2020.  

Yorkshire Building Society has a range of support tools available to help people build their financial resilience and take practical steps to saving more.  To find out more, please visit the Society’s Money MOT hub.

UK regional financial resilience rankings

Rank	2019 ranking	2020 ranking	2020 index score
1	East of England	East of England	61.3
2	East Midlands	Scotland	55.6
3	North West	London	47.8
4	Scotland	Northern Ireland	47.7
5	Yorkshire and the Humber	South West	46.4
6	Northern Ireland	Wales	46.3
7	North East	North West	46.0
8	London	South East	45.4
9	South East	West Midlands	45.1
10	Wales	East Midlands	42.5
11	South West	Yorkshire and the Humber	40.1
12	West Midlands	North East	39.6

 

UK cities financial resilience rankings

Rank	2019 ranking	2020 ranking	2020 index score
1	Preston	Edinburgh	63.7
2	Sheffield	London	62.5
3	Edinburgh	Preston	59.8
4	Liverpool	Aberdeen	58.7
5	Leeds	Liverpool	56.2
6	Leicester	Glasgow	53.5
7	Manchester	Sheffield	53.0
8	Newcastle	Leeds	52.6
9	Glasgow	Southampton	52.4
10	Aberdeen	Portsmouth	52.2
11	Nottingham	Cardiff	52.1
12	Bradford	Birmingham	50.7
13	Cardiff	Bristol	50.0
14	Milton Keynes	Manchester	49.5
15	London	Reading	48.6
16	Portsmouth	Newcastle	47.7
17	Southampton	Leicester	46.2
18	Reading	Nottingham	44.4
19	Bristol	Bradford	44.2
20	Birmingham	Milton Keynes	44.1

 

The full The Nation’s Nest Egg Report can be read here.

 

All information correct at time of publication.

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[1] The £371 billion shortfall figure has been calculated using the average figure consumers stated they would require in cash savings to feel financially secure (£17, 465) minus what the average consumer in Great Britain has in actual cash savings (£10,245). This figure has then been extrapolated across the Great British adult population, using the latest ONS estimates. 

[2]  The Nation’s Nest Egg research was conducted on behalf of Yorkshire Building Society by Cebr. The index uses data from national datasets, and Cebr analysis. The report also includes a bespoke survey analysing behavioural aspects of financial resilience.

For the research, financial resilience was determined across four pillars:

• Shock resilience
• Probability of income shocks
• Financial health
• Planning for difficulty

Each area analysed was given a score out of 100 for each of the above pillars, which were in turn combined to give an average score.

In this report, financial resilience is defined as the ability to withstand a financial shock, such as a loss of job, large unexpected bill or change of marital circumstances, as well as the probability of such a shock occurring.