UK Consumers Continue to Feel Effects of Inflation Despite 0.3 per Cent Drop in May

CHESTER, England, July 12, 2011 -

• High inflation stretches household budgets, making saving
  difficult
• One in four moneysupermarket.com customers can no longer
  afford to save
• One in five put less aside than they used to

Today’s announcement by the Bank of England that inflation has
fallen to 4.2 per cent is welcome news for the UK economy, however
the announcement marks the 18^th consecutive month where
inflation has been higher than the Bank of England’s target of two
per cent. High living costs continue to be a problem for UK
households, especially those trying to put money aside or protect
the value of their existing href="www.moneysupermarket.com/savings/">savings
pots.

A poll* run by href="www.moneysupermarket.com/savings/">moneysupermarket.com,
Britain’s number one comparison site, asked customers whether high
inflation has affected their savings habits and reveals just one in
five consumers (18 per cent) have not felt the impact.

A quarter of respondents (25 per cent) claimed they can no
longer afford to save as the cost of living has increased,
highlighting just how much of a squeeze rising costs are having on
household budgets. A further 15 per cent of those surveyed don’t
save anything now, a figure that has risen from nine per cent in
April 2011.** The poll also revealed almost one in five (18.6 per
cent) save less than they used to and 10 per cent are now paying
off more debt due to inflation.

High inflation is also having a negative effect on existing
savings pots. To beat inflation, basic rate tax payers need an
account paying at least 5.26 per cent to gain benefit in real terms
from their savings, increasing to 7.01 per cent for higher rate tax
payers and a staggering 8.41 per cent for top rate tax payers.
There is no UK href="www.moneysupermarket.com/savings/">savings account
that pays enough to offset the eroding effects of inflation.

Kevin Mountford, head of banking at moneysupermarket.com
said: “Whilst this drop can only be seen as good news,
inflation is still running at very high levels and when combined
with a static Bank of England Base Rate this represents a very real
problem for UK’s consumers, particularly those trying to save. For
those with existing savings, protecting their pots should be a
priority as inflation will be slowly eating away at the value of
their money. For others, the ability to save is being hampered by
rising cost of living leading to a significant fall in disposable
income.

“Finding a product that beats inflation is almost impossible,
however it is still important to check your savings rate, shop
around and be prepared to switch. Even if they can’t beat
inflation, the difference between the average and top paying rates
is considerable, so switching to a better deal can help savers
limit the impact on their pots.

“Clearly the majority of consumers are finding it tough to free
up any money to put aside and with factor like energy price hikes,
the cost price of fuel and pay freezes for many workers, this
situation seems set to continue. However, regular saving is still
extremely important and many people will be surprised by how much
cash they can free up by simply sitting down and reviewing their
finances. Every penny counts at the moment so looking at day-to-day
spending as well as bigger commitments, such as heating, insurance
and financial products are really important.”

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Notes to Editors:

* moneysupermarket.com carried out a site poll between 30 June
2011 and 07 July 2011.  Total 3,325 respondents.

** moneysupermarket.com carried out a site poll between
25 March 2011 and 01 April 2011. The poll received 2,089
respondents

For further information, please contact:
Jemma Green / Duncan Skehens / Victoria Murray
Lansons Communications
+44(0)20 7294 3642 / 020 7566 9732 / 0207 566 9708
jemmag@lansons.com /
duncans@lansons.com
/ href="mailto:victoriam@lansons.com">victoriam@lansons.com

Kevin Mountford
Head of banking
+44(0)787 237 8537
href="mailto:kevin.mountford@moneysupermarket.com">kevin.mountford@moneysupermarket.com

Paul Lawler
PR Manager (Financial Services)
+44(0)1244 370317
href="mailto:paul.lawler@moneysupermarket.com">paul.lawler@moneysupermarket.com
 

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