Majority cut spending amid crunch

Around 57% of people said they were tightening their belts as they worried about their finances, according to market analyst Mintel.

Holidays are the first thing to go, with 20% of people saying they were delaying plans for a family holiday, while 16% of people have cancelled planned home improvements and 11% are not increasing their savings.

The main reason people gave for cutting back on spending was the rising cost of day-to-day living, cited by 44%. A further 17% of people have been hit by unforeseen household bills and the same proportion said they just felt they needed to be more careful.

Peter Ayton, chief statistician at Mintel, said: "People are clearly starting to get a sense that things are not as easy financially as they once were.

"In light of the credit crunch, borrowing has now become harder and we are likely to see even more people having to make sacrifices when it comes to their spending in the future."

The group said income tax and National Insurance was now taking up a greater proportion of people's gross incomes, while mortgage costs have trebled during the past 10 years. It said mortgage repayments now accounted for 25% of consumer spending, or £1 out of every £4, compared with just 14% 10 years ago.

Mintel said 2008 was likely to be a tough year for the economy, but the underlying fundamentals were still in place. It added that while there would "undoubtedly" be some adjustment in house prices, interest rates were not expected to rise substantially, and if employment remained steady, underlying demand for housing would be sustained.

The group said a fairly buoyant corporate sector should mean people's incomes rose at a reasonable rate, although disposable income would continue to be whittled away by higher taxes, larger essential household bills and debt repayments.

As a result, many people were likely to find they ran out of money earlier in the month, hitting savings levels and pension contributions, as well as donations to charity.