Britons could be too fond of savings accounts now, observers warn

After almost a decade of spend, spend, spend, Britons are now taking a completely opposite view of their finances, and could be being so frugal that the UK economy could suffer as a result.

Just recently, the Office for National Statistics (ONS) reported that the amount the typical British household is putting into high street savings accounts has rocketed over recent months, amid general economic uncertainty.

Indeed, the official figures show that the household saving ratio stood at 5.6 per cent at the end of the third quarter of the year, compared with 3.9 per cent in the preceding three-month period.

This means that the proportion of take-home pay being put away for a rainy day by the average British household is now at its highest level since towards the end of 2003.

And while such a long-term economic attitude has been widely applauded, particularly when it is compared to the 'buy today, pay tomorrow' attitude so prevalent at the start of the millennium, some observers have warned that consumers will have to start splashing the cash soon if the economy is to fully recover from the downturn.

David Kuo, director of Fool.co.uk, explained that, while this growing enthusiasm for savings accounts is far from surprising, there could be wider economic implications.

"There is a danger to this, and it's called the paradox of thrift. What the paradox of thrift tells you is that, if too many people start to save money and they are not spending enough money, then the recession could actually last longer than otherwise," he said.

"Two-thirds of the UK economy depends on people going out spending money; it relies on people going out to restaurants, people going out to buy things on the high street. If people are saving money rather than spending it, then it can have the opposite effect, and can prolong the recession itself."

Despite this warning, it would appear that thriftiness is here to stay for some time yet.

In fact, Abbey Savings only just reported that Britons are now putting away a collective £3.9 billion a month as they cut back on nights out in favour of a cosy night in and healthy savings accounts.

However, it's not just bread, water and scrabble keeping families sane until the economy picks up again, as consumers splashed out £1.7 billion on takeaway meals and rental DVDs in September alone.