Savings accounts are shrinking and debt is growing in the run up to Christmas, even though spending for the year has been down, according to the Bank of England.
The BoE’s most recent Quarterly Bulletin revealed that economic recovery has lagged this year as a result of lower spending, with a large number of British households running afoul of difficult financial conditions. Consumers have had to prioritise paying their credit card bills and mortgages over spending in an effort to make ends meet, the Bulletin found.
However, the consumer activity landscape has changed this December, with many Brits reporting their household finances taking a turn for the worse at a quicker pace. Real incomes have declined at their swiftest rate in nearly three years, according to the Markit Household Finance Index, with Brits ploughing through savings and adding to debts in order to provide a memorable Christmas to their families.
While Brits are swearing off making large and expensive purchases, only 20 per cent of individuals have reported decreasing their spending, while nearly twice that figure – 38 per cent – have said their spending has gone up. One out of every three survey respondents said their savings have fallen, while 22 per cent reported higher levels of debt, while only 15 per cent of Brits said their debt has decreased and a worryingly low 8 per cent say their savings have risen.
More and more Brits have had to work harder to make ends meet, the Markit survey reported, with significant numbers of consumers taking on a second job or working extra hours. 38 per cent of the survey’s respondents had seen their financial situation worsen over the month of December, with nearly half expecting to be even worse off by this time next year.