As news of banks collapsing and trapping customers' money in the rubble hits the headlines, the Bank of England has revealed that UK households withdrew £5.2billion from their savings accounts in October.
The demise of major financial providers, such as Icesave and Lehman Brothers has contributed to the biggest quarterly outflow of cash from savings accounts
since record began in the 1960s and the biggest monthly exodus since the 1990s, according to analysts.
The record outflow of cash provides sharp contrast to the previous 12 months which saw an average rise of £5.6billion in households' M4 money holdings – the total amount of money in circulation.
Savers who are sufficiently worried about the stability of their savings account provider to withdraw their cash have primarily moved it to 'safe havens' such as National Savings & Investment and Treasury bills, which have attracted £4.7billion and £12.3billion respectively.
People were "very frightened" after the collapse of Icelandic banks and American investment giant Lehman Brothers, according to Simon Ward, economist at New Star Asset Management, and their flight to safety is "reflecting fears of financial meltdown."
He adds that the data from the Bank of England
"suggests ongoing severe pressure on profits - likely to be reflected in significant cuts in jobs and investment."
Mr Ward described the near-term outlook painted by the monetary data as "grim". He believes that it warrants another cut in the base rate when the Monetary Policy Committee meets this week, but is dubious about calls for a drastic rate cut to one per cent or lower because the recent cuts which have brought interest rates down to three per cent have already provided considerable stimulus.
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