Britons turn to savings as downturn bites

The average person had £1,783 set aside at the end of March, £100 down on the same period of 2010 and 12 per cent down on the same period of 2009, according to a survey commissioned by ING Direct bank.

The group blamed the drop in savings on more expensive living costs. Its survey showed 41 per cent used their savings just to pay for essentials such as food and fuel.

Job insecurity is also reducing the amount of money people set aside, as people use any spare cash they have to reduce their borrowings.

Around 18 per cent used savings to pay back debt, while 15 per cent were not confident about keeping their job, a proportion last seen during the recession in the final quarter of 2009.

Richard Doe, chief executive of ING Direct, said: “As the cost of living increases, people are continuing to face a difficult balancing act and are sensibly continuing to pay down their short-term debt, albeit more slowly than last year.

“As usual, something has to give and it is people’s rainy day savings funds that have fallen to £1,783, one of the lowest figures recorded since tracking began.

“The positive news is that nearly a third say that they are determined to build up their savings later in the year and if the economic situation improves they will be in a much better position to do this.”

The research found that young people and those on low earnings were most likely to use their savings.