Up to 20 million Britons cutting back on spending as confidence slumps

The full extent of the squeeze on living standards in Britain has been revealed in a new report estimating that 20 million Britons tightened their belts in the first few months of 2011.

Registering a sharp drop in consumer confidence over the past year across eight different demographic groups, a survey by the financial firm Axa found people cutting back on going out, car usage, food shopping and holidays.

A poll of almost 2,000 people conducted by YouGov found a sharp drop in financial confidence over the 12 months to March, a period that coincided with a slowdown in the economy, rising taxes, higher inflation and the announcement of the coalition government's austerity plan.

Spending restraint was particularly evident among those the survey calls "the stretched" – people in their 20s and 30s on low incomes with few financial assets – and among young professionals of a similar age with no children hoping to move out of rented accommodation into their own homes.

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"A striking 40% of consumers (up to 20 million people) chose to go out less between January and March this year, a five percentage point increase on the previous quarter," Axa said. "Half (48%) of those in the most pessimistic group, young professionals, cut back on going out. The proportion among the stretched was even higher at 56%."

The survey found that while millions of consumers were making economies in order to pay off their credit card debts, one in four of those quizzed said they were dipping into their savings to fund everyday expenditure.

A fifth of the population said they now regretted some of the financial decisions they had taken before the deep recession of 2008-09. Axa said that "nest builders" – people in their 30s and 40s with young families and large mortgages – and the stretched tended to be the most regretful.

Axa UK's chief investment officer, Eric Lhomond, said: "These figures reveal a concerted effort by British consumers to claw back some financial security in the face of a significant drop in optimism that we found across all demographic groups. The result is that we are busy paying off debts, reining in unnecessary spending and clinging on to financial products to protect or grow our assets."

More than half of those polled said they expected to have to pay for treatments on the NHS within the next three years, with only one in five consumers confident that the coalition's original health plans would make the NHS better. More than half said they wanted the 50% income tax bracket – introduced as an emergency measure by Alistair Darling during the last parliament – to become permanent.