UK consumers saving less

Savings levels plunged during the second quarter of the year as consumers focused on paying off their debts, research indicated today.

Savings levels in the UK plunged during the second quarter of the year as consumers focused on paying off their debts, research indicated today.

Britons collectively repaid £1.04bn (€1.26bn) of unsecured debt during the three months to the end of June, according to professional advice website unbiased.co.uk.

The net repayment marks a sharp turnaround from the previous quarter, when people increased their debt levels by £1.58bn (€1.92bn), while during the final quarter of 2009 they borrowed £15.84bn (€19.3bn).

The group attributed the change in behaviour to concerns that the UK could be heading for a double dip recession.

But savings levels suffered as people focused on repaying their debts, with consumers setting aside £15.45bn (€18.8bn) during the second quarter, down from £22.76bn (€27.7bn) during the previous three months.

Overall, people repaid an average of 7p of their debt for every £1 (€1.21) they saved, a trend last seen in the final quarter of 2008.

Karen Barrett, chief executive of unbiased.co.uk, said: "Britons appear to have shifted their financial habits to reflect those last seen at the height of the credit crunch, with debt repayment top of the priority list.

"For the first time since 2008, consumers are now paying off more debt than they're borrowing - however this has inevitably also resulted in a drop in savings levels."