The mounting effects of the global credit crisis are forcing Brits to curb their spending, new research from Alliance Trust has shown that Brits are facing up to financial reality and tightening their purse strings.
According to the latest Alliance Trust Financial Reality Index, consumer spending has already begun to fall and is expected to continue in this way as we weather a global credit crisis.
The study showed that before facing up to reality, British consumers had spent the past two years spending, despite a worsening financial situation. As the credit crisis takes hold, mortgage quotes
are rising and share prices are falling, forcing Brits to think before they spend.
Days of easy credit are long gone and Brits are finding themselves with requests for swift payment of outstanding credit and debts on top of higher basic living costs.
The Financial Reality Index from Alliance Trust takes several aspects into account, including employment statistics, mortgage
repayments and council tax in order to accurately assess Britain's wealth.
The Index works out a household's average disposable income and uses this to measure Britain's 'real' net wealth. In doing so, Alliance Trust predicts that household expenditure in Britain over the next 12 months will continue to decline as the credit crunch continues to squeeze on peoples finances.
The research coincides with recent reports of financial doom and gloom by showing the index for this quarter at its lowest since the study began over ten years ago.
Head of Alliance Trust Research Centre, Shona Dobbie, said: "Our latest report highlights that consumers are starting to feel the pinch of financial reality, and are showing signs of reining in spending.
"Our measures of consumer well being shows households are facing increased headwinds in terms of their finances, as food and energy prices move higher, house price growth slows and equity markets decline.
"Given the continued strain on household budgets, we expect consumer spending to slow even further in the next 12 months. Over the last two years debt levels have increased as household spending rose, despite a worsening financial reality, however, this trend is coming to an end," she concluded.
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