People spend less and plan to economise over job fears

The fall in spending came as people also reported a rise in debt for the first time since the start of the year, as well as a moderate decline in income levels, according to financial information group Markit.

Around 27 per cent of people said their household finances had worsened during October, while 45 per cent expect them to continue to deteriorate in the coming months.

Job security remained a major worry for households during October, with 24 per cent of people saying they thought their job was now less safe.

Unsurprisingly, public sector workers reported the sharpest fall in job security.

At the same time, households are still battling with inflation, with 67 per cent saying the cost of living had risen during October, although the group's inflation perceptions index was down slightly compared with September.

The group said its findings fuelled concerns that fragile consumer demand may destabilise the economic recovery.

Tim Moore, economist at Markit, said: "The October Household Finance Index data show that households grew increasingly worried about their future finances in the lead up to the Comprehensive Spending Review.

"Low levels of household confidence are clearly a concern for short-term economic growth prospects, and the forthcoming 20 per cent to 30 per cent reductions in some government department budgets will have added to many households' worries about their job security.

"With people adjusting their own spending in response to anxiety about future finances, the wider economy may be set for an extended soft patch before we see the long-term gains from the deficit reduction and benefits to the private sector of a leaner government."

Separate research suggests Britons plan to make cutbacks of nearly 200 each. Just under half of people plan to trim their budget, while 71 per cent say they will make lifestyle changes to save money, according to digital TV provider Freeview.

Around 47 per cent plan to cut down on eating out or takeaways, while 46 per cent will take their lunch to work.

A third plan to save money on socialising by staying in more often and 22 per cent will walk or cycle more often.

Six out of 10 people said they planned to spend less this Christmas, with 40 per cent reducing their spendings, while 29 per cent will go out less during the festive season.