Nearly 40% of UK households saw their monthly finances drop between this July and August.
A study conducted by the financial information company, Markit, detailed how family finances deteriorated at their quickest rate since February 2009, which was in the middle of the last recession. 
1500 adults were questioned and many said that their savings and/or income had fallen, and that their debts had risen over the last month.
Only 6% of UK households said that their financial situation had improved over the last month.
Using the Household Finances Index (HFI), which tracks household spending, savings and debt management, Markit reported that family finances had fallen for three consecutive months to its lowest level since the HFI was compiled in early 2009. The HFI fell from 34.4 points in July to 33.2 in August.
Savings fell the sharpest amount for nearly 2 and a half years and the cash that households had available to spend fell by most since the survey began.
Take-home pay dropped the most for the past nine months, and was reduced even more by the continuing rising prices of household essentials such as food and energy.
The falls were across all the UK regions and spanned all age and income groups.
Across the country the northern regions fared the worst with the biggest drops, while the south-east of England saw the slowest rate of deterioration.
Senior economist at Markit, Tim Moore, commented that the depressing report reflected the current global economy saying: “Recent events have made a week seem a long time in economics and August’s survey is the first sign that the slew of downbeat headlines has knocked consumer sentiment.”
He went on to say that people’s purchasing power was likely to continue to be squeezed in the short term with the Bank of England predicting inflation will reach 5% before the year is out, mainly due to rises in utility and fuel prices.
Other surveys compiled by accountants ICAEW/Grant Thornton and the British Retail Consortium (BRC) also report a dismal financial future.
A UK Business Confidence Monitor by ICAEW/Grant Thornton revealed that confidence in business had dropped to its lowest level since the middle of 2009 when the UK was still in recession.
A 1% decline in quarterly shopping footfall survey by the BRC, showed that fewer people were visiting the high street than a year ago.
Director General for the BRC, Stephen Robertson said: “Fewer people are shopping because households are facing high inflation, low wage growth and uncertainty about future job prospects.”
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