Seven out of ten people aren’t ready for a recession

The UK economy is shrinking. The writing has been on the wall for a while, and figures from the Office for National Statistics show that Britain is heading into a recession. However, according to a new study by money website Fool.co.uk, most consumers are still not equipped for the pain that lies ahead.

Seven out of 10 people (70%) have less than a fifth of their monthly income remaining after deducting household expenses

One in seven people have no money left over each month

One in eight people spend more than they earn

Being able to survive on less than four-fifths of our monthly salary is crucial given that the typical household spends £456 a week or £23,712 a year. The average annual income for British household is £28,070 after adjusting for deduction of taxes and receipt of benefits.

The recession is almost certainly going to be worse for one in seven people (15%) who have no money left over at the end of each month. Additionally, one in eight people (12%) spend more than they earn.

David Kuo, Head of Personal Finance at Fool.co.uk, says: "We are only in the early stages of a recession so we have yet to feel the full impact of the economic downturn. Consequently, it is important to tackle our finances head on now before it is too late to do anything about it.

"Ensuring that we can survive on less than four-fifths of our current income is vital. If you lose your present job through redundancy, your next job could pay precisely that - less than four-fifths of what you now earn.

"It is, therefore, vital that we cut back on household expenses and start putting money aside immediately. No one can be certain how long the recession will last, but a cash cushion stuffed with at least three month's worth of household expenses can be a great comfort in an economic downturn.

"Remember, just because your working life may come to an end in a recession doesn't mean your everyday expenses have come to an end too."