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Household savings ratio falls to lowest level in almost 50 years

Families in the UK are saving at the lowest level in almost half a century as the credit crunch squeezes into their incomes, official figures have shown.

Britons are having to dig deep into their savings as they face soaring mortgage rates, rising food and energy costs and stagnant wage increases, the statistics reveal.

The savings ratio is compiled by The Office for National Statistics and measures the proportion of a person's disposable income - after paying tax and national insurance - that is put away for a rainy day. It includes savings in bank accounts, ISAs and also pensions.

The saving ratio more than halved in the first three months of the year to 1.1% - the lowest level since 1959, when Harold Macmillan was Prime Minister.

The trend will cause major concern within the City and Whitehall: a sharp fall in the savings ratio is usually a sign that the economy is about to suffer a serious slowdown.

The ratio is now far shy of its average rate since the 1980s of 7.8%.