Discussion of the effect of demographics on the UK economy is apt to centre on the burden of an ageing population. However the main impact of this will not be felt for another 30 years. In the meantime, demographic trends will be more favourable, as those who will be retired in 2020 move into their middle years. People do most saving during this phase in their lives, as the burdens of children and mortgages diminish and the prospect of retirement looms. Over the next 10 years the number of high-saving 45-64-year-olds will increase from around 13 million today to over 14.5 million, while those in the 25-44 age bracket (who are generally borrowers) decline and the number of retired (over 65 and running down their savings) remains stable. The chart shows that the ratio of `savers' to `borrowers' and `retired' should rise from a current 0.5 toward 0.6. As the supply of savings increases, demand from households should be slowing down which will help to boost funds available to the corporate sector. In consequence, says Schroder Economics, the UK should be better able to meet its capital needs without recourse to overseas borrowing, which should help to provide a firm footing for sustainable growth.
The combination of increasing numbers of savers and a diminishing number of borrowers is even more marked in the US, where the ratio between the two groups is set to rise significantly over the next 10 years. Elsewhere the demographics are less favourable. In Germany the ratio of savers is expected to be stable, while in Japan it is expected to decline. As a consequence there could be a significant shift in international savings patterns, with the traditionally spendthrift Germans and Japanese changing places with the typically low-saving Anglo-Saxons.