Source: Press TV
Household finances in Britain have taken their steepest drop in two and a half years making family finances worse than at the peak of recession in 2009.
Markit's Household Finance Index, which measures consumer spending in Britain by conducting surveys, showed that around 40% of British households have reported deteriorating finances while only 5% of the families have reported an improvement in their finances.
Markit, a financial information services company, has been conducting the survey since February 2009. However, August's steep fall in household finances indicated that families are in a worse economic situation than they were at the height of the recession in 2009.
“Households reported the sharpest deterioration in their finances since the survey began, exceeding even that seen during the worst point of the recession,” said a senior economist at Markit, Tim Moore.
The survey showed that an increasing number of British families are using their savings to be able to make ends meet. Furthermore, it was revealed that debt levels were on the rise increasing for the fifth consecutive month.
Moreover, the soaring inflation rate has squeezed households' spending power as the take-home pay continues to decline after it saw its steepest drop in August.
The financial information company found out that all income groups suffered the consequences of the dire economic situation. However, families in the north of England have been suffering more than those in the south.
Furthermore, the future of the British economy does not seem promising as around 40% of the survey families anticipated a worse financial position.
Britain's economic recovery is to receive further blows as household budgets are being cut while inflation rate is on the rise.
"With consumer spending accounting for around two-thirds of UK gross domestic product, this does not bode well for the economy in the second half of this year," said Moore.
In addition, rising unemployment and soaring utility bills will further undermine the fragile recovery of the British economy.