Consumers move quickly to neutralise effects of credit crunch

Eating out and buying new clothes are two of the biggest casualties of the credit crunch as consumers in the East Midlands continue to reassess their spending habits in light of the major slump affecting the UK economy.

New research from The Nottingham, which forms part of the society's quarterly analysis of consumer habits and expectations, sheds an interesting light on how people are coping in the more constrained credit environment - and the key factors that are influencing their behaviour.

A major factor influencing all actions is the understanding people have of the scale of financial problems affecting the UK economy.

More than 80% of people believe the worst effects of the credit crunch are not yet over - with one-in-three people expecting the credit crunch to continue until the end of 2010. In addition, almost one-in-five people under the age of 45 are becoming increasingly concerned about their employment prospects.

As a result, consumers are determined to tighten their purse strings.

Those people taking decisive and immediate action and are cutting back on dining out and adding to their wardrobes accounted for more than 50% of people interviewed by The Nottingham. A further one-on-four people say they are now travelling to work on the bus instead of using a car.

Swapping well-known branded foods for cheaper alternatives is also another way households can save money, and 28% of respondents said they are acting decisively in this area.

"For many years we have had a live now and pay later attitude," commented The Nottingham's Lorraine Giddings, who runs the society's 32-strong network of building society and estate agency branches in Nottinghamshire and Lincolnshire. "So it is great to see that people are starting to return to the traditional approach of putting money aside for a rainy day."

While making cutbacks is seen as a necessity in the current climate, so, too, is finding the right kind of financial organisation to have a long-term relationship with.

"We have also seen a shift in what is important to people, when they are choosing a home for their money," added Lorraine Giddings.

"The effect that the credit crunch has had on some big names in the banking world is causing people to think long and hard about which institutions offer a safe haven for their hard earned savings."

Other significant findings include the developing savings habit that is now becoming an important priority for a growing number of local people - particularly Midlanders aged 45 or younger - and the financial stability of any institution a consumer may consider having a relationship with.

"Not knowing what the future holds is a significant cause for concern for many people, particularly those aged under 45," added Lorraine Giddings.

"This has directly led to 10% of the people we questioned to open savings accounts in recent weeks, while 21% of those people we spoke to, with existing savings, said they were increasing the amounts they were setting aside."