‘Green shoots of recovery' lead Brits back to debt

With news that we are near the end of the recession all around us, research from Unbiased.co.uk, the professional advice website, reveals that the so called ‘economic optimism' has led Brits straight back down the debt path.

Q1 2009 saw a dramatic shift in consumer behaviour and for the first time in six months, Brits took out more debt than they repaid. As a result, the first quarter of this year saw new debt rise to £2.7 billion, while savings levels dropped to an all time low.

Unbiased.co.uk's Savings Brake research reveals the ratio of how much we are borrowing (excluding mortgage debt) contrasted with how much we are saving. In Q1 2009, savings levels hit £14 billion - the lowest level since the research was first commissioned nine years ago.

As a nation we are now borrowing 19p for every pound saved. This is in stark comparison to the second half of 2008 which saw consumers fight the recessionary doom and gloom by concentrating on clearing their debts, with £1.76 of debt repaid for every pound saved.

David Elms, Chief Executive of Unbiased.co.uk, comments: "The financial turmoil of 2008 prompted a dramatic retreat from savings in favour of repaying personal debt. The first quarter of 2009, in contrast, has seen consumers going back to ‘the old ways' as they shift back into borrowing. The drop in savings could of course be an indication that consumer faith in savings returns and the low interest rates are still preventing people from utilising savings accounts. And the worry has to be that people may be keeping their cash where they can see it; in current accounts or in their wallet!

"After the relentless financial gloom of last year, the public mood seems to be changing with financial forecasters spouting optimism over Britain's economic prospects. However, though this is certainly a positive development, it is vital for consumers to continue nurturing their financial position. Anyone with financial concerns should seek professional advice from an independent financial adviser. Only an IFA will be able to help you strike the best balance between borrowing, saving and other financial aspects."

Those interested in boosting their savings should visit Unbiased.co.uk and download a dedicated guide - Join the Savings Revolution - which looks at how you can budget to save more, and options of where to put any extra money. You can also obtain details of local independent financial advisers to talk though the most suitable savings options for you by visiting Unbiased.co.uk