Brits plan to reduce personal debts

By UK CreditCards.com

Published: 30 January 2012

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Britons are becoming increasingly pessimistic about their finances, according to new research from an independent think tank. The Resolution Foundation's consumer survey suggests that many intend to cut back on spending, save money and pay off their debts. Its findings indicate that, despite growing signs of optimism in recent months, perceptions of household finances have taken a turn for the worse.

One-third plan to reduce spending
The proportion of people who plan to cut back their spending has risen since the Resolution Foundation's last quarterly survey, which was conducted in October 2011. One in three adults (32%) intend to reduce their expenditures this year, up from just 19% who said the same in October. Among the poorest households and those in full-time work, the figure rises to 38%.

The trend coincides with an increase in the proportion of adults who expect their household finances to worsen over the coming months, which has risen to 23% -- a level not recorded since last summer.

Many keen to pay down debts
The poll of 1,993 adults also revealed that Britons plan to take a more proactive approach to managing their finances, including saving more and reducing their levels of debt. Three in 10 respondents said they now make monthly savings, up from just 22% in October. Meanwhile, the proportion of people intending to reduce their levels of credit card, loan and overdraft debt has increased from 12% to 17%.

These findings reflect other recent reports from Santander Credit Cards and the Finance & Leasing Association about a decrease in spending and an increase in credit shyness in the UK.

Gavin Kelly, the Resolution Foundation's chief executive, worries that already "hard-pressed" families are expecting another tough year of cutting spending and reducing debt.

"Given this gloomy backdrop, it's a real worry that a new round of cuts to tax credits planned for April will further dampen the spending power of low- to middle-income families," Kelly said in a statement on the foundation's website.

See related: Credit card spending fell in 2011; Britons have an appetite for debit