Britons say they are saving rather than spending any money they make from the latest Bank of England interest rate cuts or the tax reductions announced in the pre-Budget report.
Research carried out by Nationwide building society, seen by The Indpendent on Sunday, shows that the percentage of consumers saving regularly has gone from 47 to 52 per cent in the past month alone. What's more, the proportion of people agreeing that saving is now a priority is up from 30 to 33 per cent over the same period. This is the first time since Nationwide started surveying consumer attitudes to saving in May that there has been seen such a radical shift.
This new focus on saving reflects increasing disposable incomes but also a general nervousness over job prospects. The reductions in interest rates have freed up cash, while people's finances have been given a further boost through the easing of food inflation and significantly lower petrol prices. But instead of spending the money in the shops – which was a key aim of the Government's recent cut in the rate of VAT from 17.5 to 15 per cent – it seems nervy Britons are shoring up their savings.
"This isn't good news for the retailers. People have become used to the higher cost of living and now they see things easing, they are saving rather than spending," says Charlotte Sjoberg from Nationwide. "Who can blame them? When you are worried about your job, you don't go out and spend."
Several of the UK's biggest retailers – including Marks & Spencer, Debenhams, Littlewoods Direct and Ikea – have been heavily discounting items in the run-up to Christmas in a bid to attract more shoppers into their stores.
However, the new enthusiasm among Britons for setting money aside coincides with banks and building societies slashing the rates they pay on accounts. Research from financial information service Moneyfacts shows that November's shock 1.5 per cent cut in interest rates led to significant and widespread reductions in savings deals. In total, 50 banks and building societies cut their rates by more or the same amount as they lowered mortgage rates, while only 15 providers did the reverse.
More pain may now be on the way for savers, following last Thursday's further 1 per cent fall in the Bank base rate. "The likelihood is that a similar pattern to last time will emerge, with banks and building societies moving fast to cut savings rates," says Michelle Slade from Moneyfacts.
Longer term, adds Ms Slade, the days of savers being able to scoop rates comfortably above inflation are coming to an end. "There are definite signs that banks and building societies are starting to trim their offerings. For example, some providers have raised the amount of money that savers have to put into their accounts before they will get access to the best rates."
Ms Slade adds that average rates on savings accounts have slipped around 2 per cent in the past five weeks. "The banks and societies needed depositor cash because of the credit crunch and they still need it. But some have got their businesses on a more even keel, which means they don't have to pay bumper rates to attract the money washing around from consumers."