Now the credit crunch is hitting home

Evidence is growing that higher interest rates, utility prices and food bills are forcing consumers to cut back. By Martin Hickman

Britain's decade-long era of "spend, spend, spend" has ended with a bump, according to polling published today, revealing millions of households squeezed by the credit crunch are cancelling holidays, DIY projects and shopping trips.

In a sign that the hangover for the nation's collective credit party has begun, rising utility, food, tax and mortgage costs have so reduced disposable income that 28 million adults have cut their discretionary or luxury spending.

The big summer holiday is the biggest casualty, with 20 per cent of people trimming spending on their annual break, perhaps by staying at home or by going somewhere cheaper, or cutting short their stay.

Some 16 per cent have cancelled DIY and home improvements such as decorating or an extension, while 11 per cent have stopped or reduced saving.

One in 10 people have scrapped a plan to buy new clothes, jewellery or footwear; a new car; or household furniture and furnishings.

Hardest hit are those who have borrowed heavily to buy a new home: the young, singles and families with young children, according to the poll of 2,000 adults for Mintel's annual lifestyle survey.

The research, conducted in February, is one of the first pieces of evidence that the public are changing their behaviour to take account of the economic slowdown.

Peter Ayton, Mintel's chief statistician, said: "People are clearly starting to get a sense that things are not as easy financially as they once were.

"In light of the credit crunch, borrowing has now become harder and we are likely to see even more people having to make sacrifices when it comes to their spending in the future."

In the poll by GFK NOP, most people, 57 per cent – equating to 28 million adults – said they had not bought something they wanted in the past 12 months because of concern about their household finances.

Of the factors slowing spending, the biggest, cited by 44 per cent of people, was the rise in the cost of day-to-day living. One in six said they had received some big household bills; had seen their income plunge for another reason; or just felt they should be more careful in their spending.

Above-average rises in council tax, water and energy bills have pushed their overall cost to £2,510 compared with just over £2,000 two years ago, according to Mintel. Once average phone bills are included, the average monthly utility bill passed £3,000 for the first time, hitting £3,169.

At the same time, tax as a proportion of income has increased from 17 per cent in 1997 to 21 per cent in 2007. And mortgage capital and interest repayments have more than trebled, rising 213 per cent, to the point where £1 in every £4 of consumer spending goes on mortgages. "The days of cheap, easy credit are history. Banks won't lend to each other, they're frantically shoring up their retail deposits to stabilise their exposure to bad debt," the report said.

"In the meantime, consumers who have binged have been left with a nasty hangover, aware that lenders are beginning to circle around their bad risks, reducing their credit limits, putting up the cost of borrowing and refusing loan extensions."

Predictions that more people would experience harder times this year also came from another source. The debt management firm TDX Group estimated that the number of people taking out debt management plans and IVAs (individual voluntary arrangements, a way of paying back personal debts) could double from 400,000 in 2007 to 800,000 in 2008.

About one million people are thought to be struggling with unsecured debt, collectively owing £25bn, or an average of £25,000 each, according to the company. About 60 per cent of that is owed on credit cards, with the remaining 40 per cent borrowed through other means, mainly personal loans.

How Britons are tightening their belts

MAIN HOLIDAY

While many of us see an annual holiday as essential rather than a luxury, one in five people – or12 million Britons – say they will cut back on a summer break. Young people aged 15 to 34 are more likely to go without a holiday. "The likelihood is that holidays will still be taken but inevitably in the form of cheaper options, or else shorter-duration breaks which match the household cash-flow," the report says.

DIY

DIY chains are suffering because householders considering big projects are no longer holding the "security blanket" of rising property values. Older people, in particular, are more cautious. On the upside, demand for low-cost cosmetic improvements may rise as people stay put.

SAVINGS

The young, singles and families with young children are putting off saving to pay for every day living expenses. Saving is an easy target for cutbacks, having achieved a "nice if there's some spare cash" status, according to the report. One in 20 has cancelled plans to top up a pension.

CLOTHING

One in 10 people have cancelled a trip to buy clothes. The worst-hit are those who buy most clothes – young single people and large families. Discount stores offering fast fashion as a "self reward" are likely to escape the worst of the crunch, while more expensive designer labels suffer in the credit slowdown.

MOTORING

New car registrations have been falling for years, partly because people are opting for second-hand, nearly-new models. Now, lower incomes and higher petrol prices mean fewer people are seeking finance for a new car. Eight per cent of the population have scrapped plans to buy a new main car.

FURNITURE

New sofas, chairs, tables, beds, curtains and blinds have been put on the back-burner by families squeezed by rising bills. Nine per cent of people have scrapped plans to buy one of these items, making furniture and furnishings the sixth biggest area of cutbacks after holidays, DIY, savings, cars and clothing.

GOING OUT

Cinemas, restaurants, pubs, bars and nightclubs have all suffered as people trim their discretionary spending. Although a limited amount can be saved by staying at home, 7 per cent of people have cancelled at least one night out. People may trade down, from the theatre to the cinema, or from fine to casual dining.

WEEKEND BREAK

Another lesser casualty is the weekend spa or city break in Britain, or the short-haul trip to a European capital. Spring and autumn trips either side of a summer holiday may be sacrificed to ensure families can afford their main break. One in 20 of us – about 2.5 million people – have cancelled such plans. More may cancel if their credit card limits are cut.

COMPUTER

Five per cent of people have postponed plans to buy a new computer, but IT is predicted to be one of the least affected areas of the economy because new purchases are often made to replace broken equipment. More susceptible, says the report, is the leisure electronics market. Many may have to give up their dream of owning a flat-screen plasma television.

DAYS OUT

Daytrips to the seaside or theme parks have suffered a little less than more expensive weekend breaks. "These are mainly impulse-driven expenditures, yet in the roster of day-to-day housekeeping priorities, they represent some of the more expendable areas of spend," the report warns.

Stavrakis Georgiou, 29: 'A housing crash wouldsuit some of us just fine'

Mr Georgiou is a drama student who is struggling to pay his college fees

"They say the life of a student is one of leisure, but that's not how it feels right now," he says.

The cost of living is making it impossible for him and his fellow students to afford their fees. "It's coming close to a situation where we're forced to drop out because studying costs too much. You get to the end of each week and suddenly there's nothing left over in your pocket. Rent is up, food is up, water, gas, and electricity are up. Even over just the past six months, my disposable income has shrivelled completely".

Mr Georgiou is looking for work in several areas but because of his studies, can't commit to a full time job. "I'm putting my CV forward to temping agencies, trying to get a few shifts here and there. I'm also looking at working as an extra in any productions that need them. I have to do something, because the loans that most students live off are becoming much harder to get hold of. And I don't want to be in debt forever".

Mr Georgiou says that he was planning to take out a mortgage and try to get on the property ladder but has given up hope now.

"Politicians don't realise how scary it is for people on low incomes thinking about buying property. Frankly a housing crash would suit some of us just fine."

High street banks, says Mr Georgiou, deserve our ire for their role in creating the current economic climate. "The behaviour of banks is disgraceful: they cream huge profits out of us, but when we really need the liquid cash they say they're not interested. It's hopeless".

Sonia Reid, 57: 'My own income is too modest to survive on'

Ms Reid works in a church on a modest salary. She was recently widowed, and is now using up her savings and cancelling her holiday

"When my husband died I thought that with a small income and some savings I would be able to survive. But with weekly bills growing all the time I'm eating into my savings far earlier than I had planned to," Ms Reid says.

Increasingly, she is forced to depend on her adult daughter, who also has a young child to support.

"I am working hard but my own income is too modest to survive on, and I won't find it easy to get into another career, even though I may want or need to. Instead I'm sitting down and doing a budget, writing down my daily expenses and seeing what I can do without," she added. This year she won't be visiting family in Jamaica.

Ms Reid says: "You find yourself converting the cost of a plane ticket to the Caribbean, at least £420, into the number of weeks of gas, electricity, and water that money will buy. Then you realise one is dispensable, but the other is not: survival comes before luxury."

Click here to have your say

Suggested Topics
News
Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
Sport
sportDidier Drogba returns to Chelsea on one-year deal
Arts and Entertainment
The Secret Cinema performance of Back to the Future has been cancelled again
film
News
people
PROMOTED VIDEO
Arts and Entertainment
Christian Grey cradles Ana in the Fifty Shades of Grey film
filmFifty Shades of Grey trailer provokes moral outrage in US
News
BBC broadcaster and presenter Evan Davis, who will be taking over from Jeremy Paxman on Newsnight
peopleForget Paxman - what will Evan Davis be like on Newsnight?
Sport
Louis van Gaal would have been impressed with Darren Fletcher’s performance against LA Galaxy during Manchester United’s 7-0 victory
football
Voices
The new dawn heralded by George Osborne has yet to rise
voicesJames Moore: As the Tories rub their hands together, the average voter will be asking why they're not getting a piece of the action
Sport
Dejan Lovren celebrates scoring for Southampton although the goal was later credited to Adam Lallana
sport
News
newsComedy club forced to apologise as maggots eating a dead pigeon fall out of air-conditioning
Arts and Entertainment
Jo Brand says she's mellowed a lot
tvJo Brand says shows encourage people to laugh at the vulnerable
Life and Style
People may feel that they're procrastinating by watching TV in the evening
life
Sport
Rhys Williams
commonwealth games
News
Isis fighters travel in a vehicle as they take part in a military parade along the streets of Syria's northern Raqqa province
i100
Arts and Entertainment
Southern charm: Nicolas Cage and Tye Sheridan in ‘Joe’
filmReview: Actor delivers astonishing performance in low budget drama
Life and Style
fashionLatex dresses hit the catwalk to raise awareness for HIV and Aids
Travel
travel
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Senior Risk Manager - Banking - London - £650

    £600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

    The benefits of being in Recruitment at SThree...

    £18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

    Test Analyst - UAT - Credit Risk

    £280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...

    Trainee Recruitment Consultants - Banking & Finance

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

    Day In a Page

    Evan Davis: The BBC’s wolf in sheep’s clothing to take over at Newsnight

    The BBC’s wolf in sheep’s clothing

    What will Evan Davis be like on Newsnight?
    Finding the names for America’s shame: What happens to the immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert?

    Finding the names for America’s shame

    The immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert
    Inside a church for Born Again Christians: Speaking to God in a Manchester multiplex

    Inside a church for Born Again Christians

    As Britain's Anglican church struggles to establish its modern identity, one branch of Christianity is booming
    Backhanders, bribery and abuses of power have soared in China as economy surges

    Bribery and abuses of power soar in China

    The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
    Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

    Highland terriers steal the show at opening ceremony

    Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
    German art world rocked as artists use renowned fat sculpture to distil schnapps

    Brewing the fat from artwork angers widow of sculptor

    Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
    BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

    BBC takes viewers back down memory lane

    The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
    Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

    Nicolas Cage shines in low-budget drama Joe

    Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
    How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

    Make your own ice lollies and frozen yoghurt

    Think outside the cool box for this summer's tempting frozen treats
    Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

    Fiesta is UK's most popular car of all-time

    Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
    10 best reed diffusers

    Heaven scent: 10 best reed diffusers

    Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
    Commonwealth Games 2014: Female boxers set to compete for first time

    Female boxers set to compete at Commonwealth Games for first time

    There’s no favourites and with no headguards anything could happen
    Five things we’ve learned so far about Manchester United under Louis van Gaal

    Five things we’ve learned so far about United under Van Gaal

    It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
    Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

    Screwing your way to the top?

    Good for Lana Del Rey for helping kill that myth, says Grace Dent
    Will the young Britons fighting in Syria be allowed to return home and resume their lives?

    Will Britons fighting in Syria be able to resume their lives?

    Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"