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Household finances ‘worse than in the recession’

Household finances are declining at their fastest pace since the height of the recession in February 2009, new research suggests.

According to a survey by the financial information company Markit, almost 40% of those quizzed reported a fall in their finances between July and August, while just 6% said their financial situation had improved.

The drop in household savings and available cash was the fastest fall for two and a half years and has been attributed to high inflation, soaring debt levels, high unemployment and decreasing take-home pay.

The research found that all income groups, age ranges and regions monitored are suffering in the current economic climate, although those in the north of England are under more financial pressure than those in the south of the country.

Commenting Tim Moore, senior economist at Markit, said: ‘Recent events have made a week seem a long time in economics, and August's survey is the first sign that the slew of downbeat headlines has knocked consumer sentiment.

‘With consumer spending accounting for around two-thirds of UK gross domestic product, this does not bode well for the second half of the year. It is likely that the UK economy will be increasingly dependent on external demand.’