Britons weather storm by saving more cash

Nervy households are hunkering down against the economic storm with a big rise in savings - bad news for the UK's fast-fading recovery.

Official figures showed the share of income put aside by households jumping to 7.4% between April and June, the highest for almost a year.

Disposable incomes rose 1.2% after dropping 1.7% in the first three months of the year, but consumers chose to stash away the extra cash for a rainy day with precautionary savings.

The retrenchment, coming at a time of worsening prospects for the jobs market as unemployment hits a 17-year high, is also at odds with forecasts from the Office for Budget Responsibility. The government's independent forecaster expects the household savings share of income to fall to 3.5%.

Separate figures from the British Bankers' Association also revealed consumers paying back loans and overdrafts in to put their finances in order, with a net repayment of some £200 million in September.

IHS Global Insight's Howard Archer said: "Consumer appetite for taking on new borrowing is very low while there is also a strong desire of many consumers to reduce their debt.

"Consumer desire to get a tighter grip on their finances is clearly the consequence of current heightened concerns."