UK ‘in £55bn hit’ as home loans squeeze spend­ing

London Evening Standard (West End Final A) - - BUSINESS - Rus­sell Lynch

THE UK could be £55 bil­lion richer over the next decade if mort­gageslave Bri­tons stuck more cash into pen­sions, an eco­nomic think-tank claimed today.

The Na­tional In­sti­tute for Eco­nomic and So­cial Re­search’s in-depth study of house­holds over 20 years found those with mort­gages typ­i­cally had a 15% lower pri­vate pen­sion in­come on re­tire­ment.

Ser­vic­ing home debt “crowds out” pen­sion sav­ings, par­tic­u­larly in the first decade af­ter the loan is taken out, it found. But pen­sion sav­ings are also used to fund busi­ness in­vest­ment, where the UK lags other ad­vanced economies by far.

The UK pumps 66% of its in­vest­ment spend­ing — 9.2% of over­all GDP — into busi­ness in­vest­ment, with the rest go­ing into prop­erty. But if that share rose to 80%, bring­ing it into line with the likes of the Nether­lands, NIESR’s mod­el­ling sug­gests the re­sult­ing rise in pro­duc­tiv­ity would push GDP

£55 bil­lion higher by 2028.

NIESR’s as­so­ciate re­search di­rec­tor Monique Ebell said: “UK house­holds’ over-re­liance on hous­ing as a form of sav­ing and in­vest­ment is af­fect­ing their own in­come at re­tire­ment, and the UK econ­omy as a whole.” @russ_­lynch

Bril­liant or­ange: the Nether­lands pumps more in­vest­ment into busi­nesses than Bri­tain

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