Credit crunch hits household spends
Updated on 19 May 2008
Nearly half of people are changing their spending habits to tackle soaring inflation and the impact of the credit crunch, a survey has shown.
Households are feeling the squeeze from dearer petrol, food and gas and electricity bills as mortgage costs also rise - with official inflation hitting 3% in April.
And around 44% of people are shopping around for better deals and reining in spending, according to a YouGov poll on behalf of investment firm Skandia.
The survey paints a bleak picture of Britons preparing to weather the economic storm by cutting back on a host of luxuries - and even forced to watch the pennies over basics like food.
Almost two in five people - 38% - say they are more likely to cut back on luxuries in 2008, while 35% have given up pleasures such as jewellery, spar treatments and holidays, the survey suggested.
The "Middle England" bracket - earning between £30,000 and £50,000 - is more likely to shelve summer holiday plans, with 26% staying at home compared to 20% overall.
One in five people have put major DIY or "big ticket" purchases like cars on hold, while nearly a quarter are also cutting back on food spending and essentials, it added.
Skandia's strategy director Michelle Cracknell said: "We are undoubtedly seeing some adjustments in the way people manage their money, which is understandable given the current environment."
Bank of England Governor Mervyn King last week braced households for tougher times ahead as inflation was driven by record oil prices but the economy slows to a crawl. The high inflation means the Bank has little room to lower interest rates and ease the pressure on borrowers.
Mr King said: "There will be a squeeze on living standards over the next couple of years - consumer spending will not grow rapidly."
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