Households cut back on spending

money in jeans

One third of UK adults plan to reduce their spending this year, a rise from 19% in October, new research shows.

Around a quarter of the 1,993 adults questioned in the same survey say they expect their finances to get worse in 2012, with those on low to middle incomes the most likely to cut back on spending, says the Resolution Foundation.

Instead of spending, Britons appear to be focussing more on paying off their debts and building their savings. Almost 20% of people asked said they plan to reduce their debts, compared to 12% in October, and 30% are now making monthly savings, an increase of 8% in the past three months.

But despite the pessimistic results, one quarter of adults are also holding out for a pay rise, with this number rising to 32% of higher earners.

Gavin Kelly, chief executive of the Resolution Foundation, says: "Families that are already hard pressed are preparing for yet another very tough year ahead, with a big rise in the numbers planning to cut back spending as well as trying to save and reduce their debts.

"Given this gloomy backdrop, it's a real worry that a new round of cuts to tax credits planned for April will further dampen the spending power of low to middle income families."