Crunch hits spending habits

Updated 10.42 Mon May 19 2008

Keywords: cash, spending, credit crunch, money

The credit crunch is forcing almost half of people to change their spending habits, a survey has shown.

Households are struggling with dearer petrol, food and gas and electricity bills as mortgage costs also rise - with official inflation hitting 3 per cent in April.

The polls says the "Middle England" bracket - earning between £30,000 and £50,000 - is more likely to shelve summer holiday plans, with 26 per cent staying at home compared to 20 per cent overall

Almost two in five people - 38 per cent - say they are more likely to cut back on luxuries in 2008, while 35 per cent have given up pleasures such as jewellery, spar treatments and holidays, a YouGov survey for Skandia suggests.

The polls says the "Middle England" bracket - earning between £30,000 and £50,000 - is more likely to shelve summer holiday plans, with 26 per cent staying at home compared to 20 per cent overall.

One in five people have put major DIY or "big ticket" purchases like cars on hold, while nearly a quarter are also cutting back on food spending and essentials, it added.

Skandia's strategy director Michelle Cracknell said: "We are undoubtedly seeing some adjustments in the way people manage their money, which is understandable given the current environment."

Last week, Bank of England Governor Mervyn King braced households for tougher times ahead as inflation was driven by record oil prices but the economy slows to a crawl.

The high inflation means the Bank has little room to lower interest rates and ease the pressure on borrowers.

Mr King said: "There will be a squeeze on living standards over the next couple of years - consumer spending will not grow rapidly."