An 'equilibrium' is being reached as formerly free-spending consumers are saving more and paying down their debts, according to a top economist.
The current upturn in the amount Britons are putting by into savings accounts represents a return to normal for the UK, the chief economist of Lloyds TSB said today.
Trevor Williams said that savings levels had been too low for years prior to the onset of the credit crunch and financial downturn - with consumers instead preferring to spend and borrow. However, with the financial turbulence has come a newly prudent attitude according to several recent reports.
National Savings & Investments, the government-backed savings accounts and "safe" premium bonds provider, noted that Britons saved an average of £86 per month over 2008 - rising to an average of over £90 in the last months of the year. Meanwhile, the Bank of England found that consumer credit registered a net decline of £200 million in February 2009 - the first month that Britons paid off more unsecured debt than they had taken out since 1993.
Commenting on the trends, Mr Williams said: "The desired amount in savings has gone up as unemployment is rising and the economic crisis has forced people to realise that they are not saving enough… it's probably not going to end until it's clear that economic recovery is underway and employment prospects have improved."
He added: "The desired savings rate in the UK has been too low for the last few years and so there will be an increase in savings rates to a new equilibrium level."
Despite the improvement in savings levels, research from Nationwide released last month showed that many Britons see putting money by in deposit accounts as unimportant. Just under half of all consumers were found by the firm to be saving regularly - while one in four were not saving at all.
