The Alliance Trust analyses a number of official data sources and compiles a Financial Reality Index whereby a reading of 100 is considered satisfactory.
These figures fell from 79.6% to 56.7% between the 2nd and 3rd quarter, the largest quarterly fall since Alliance began compiling these records from 1997.
The reason behind this is a cocktail of rising food prices, record heating bills, high petrol prices, steadily increasing unemployment, lower wage growth, the Eurozone crisis and plunging stock markets which have all had a bearing on the situation.
The sudden fall in economic confidence is being confirmed by many high street retailers which have suggested that shoppers have drastically cut back their spending after the summer.
A spokesman for the Alliance said “The record decline in our index in Q3 highlights just how tough conditions facing households are. During the quarter, the decline in the net wealth index was particularly marked, mainly as result of the large stock market losses”.
Another separate survey recently published (The Asda/CEBR Income Tracker) said that the squeeze on family finances had left the average household with £163 of weekly disposable income – down 8.4% from this time last year (or £15 per week).