It was only last week when The Economic Times reported that – “the Bank of England highlighted that UK consumers had borrowed a record amount in February, with many economists commenting it was a sign that the cost of living crisis was actually hitting wallets even before Putin’s invasion of Ukraine pushed energy prices higher. But now there’s only one day to go before average energy prices zoom up by 54 per cent.”

Today, we are now seeing just how damaging the cost of living crisis is becoming – or more alarmingly – just how fast it is taking effect. Household savings in the UK are now being drained at the fastest rate for nearly ten years.

The financial editor of The Times reports that – “About 40 per cent of households built up their savings during lockdown but 60 per cent did not, according to the Scottish Widows Household Finance Index. It found that the amount of cash left for discretionary spending after living expenses has fallen by the sharpest amount since 2013. The measure of people’s perceptions of financial wellbeing fell to 38.5 per cent in the first quarter of this year, its lowest since the start of the pandemic two years ago. A score of 50 per cent indicates no change on the previous quarter.”

The rising cost of living is now the biggest money concern of almost half of households according to Aldermore Bank’s latest savings tracker, which surveyed 4,000 UK adults.

Households now face what many consider to be a perfect storm of financial strain -everything from National Insurance tax hikes alongside the huge increase in energy price cap and fuel costs, escalating food shopping bills, and other bills rising with inflation. Combined this has led to a sharp fall in sentiment about discretionary spending.

Emma Watkins, head of retirement at Scottish Widows, said: “It’s tough right now for households trying to manage the surge in day-to-day living costs. We know that many households have failed to boost their savings during the pandemic and that over 70 per cent of households will need to eat into their savings in the next 12 months.”

A study by Ipsos Murray found that of households that had built up savings in lockdown, nearly three quarters (73 per cent) now expect to have to dip into them in the next 12 months and 17 per cent to exhaust them completely. Only the highest earners added to their household savings.