Fears that an abrupt consumer downturn will undercut the economy mounted today after confirmation that households’ spending growth virtually ground to a halt at the end of last year as fretful Britons boosted their savings.

Updated official data showed that a sharp retreat by Britain’s previously irrepressible consumers saw growth in their spending slump to a meagre 0.1 per cent in the final three months of last year (Q4) — half the pace previously estimated.

The apparent move by consumers to rein in their spending aggressively came as they also increased their savings in what may be a symptom that anxieties over the economic outlook and a deepening housing market downturn are taking a toll on sentiment.

The savings ratio, the main official measure of how much households put aside from their income, jumped in Q4 to 3.3 per cent, up from 2.6 per cent in the previous three-month period, although still at relatively low levels.

Consumer confidence is rapidly wilting in the face of a housing markets’ woes and worries over a deteriorating economic outlook.

The latest snapshot of consumer confidence today showed it dropping to its lowest level for a decade and a half.

The headline index of sentiment from GfK NOP dropped to minus 19, its worst level since February 1993.

Government figures showed annual economic growth rose 2.8 per cent in Q4, down from the previous 2.9 per cent estimate to the weakest since spring 2006.

Quarterly growth was left unrevised at 0.6 per cent.

The bleak figures stoked market fears over UK prospects and speculation about a cut in interest rates as soon as next month, piling further pressure on the pound.

Sterling tumbled to a record low against the euro, which was driven to its highest level against the pound, rising to 79.28p, taking it within striking distance of 80p for the first time. The pound also sank back below the $2.00 watershed.

However, there are several other glimmers of hope over the outlook.

There has been a strong pick-up in households’ real disposable incomes, after inflation, which grew by a revised 1.3 per cent in Q4, boosting the annual pace of increase to a robust 2.6 per cent.

Companies’ gross operating surpluses, a GDP-based measure of profits, jumped by 3.3 per cent in Q4 compared with a previous estimate that they stagnated in the closing months of last year.

Business investment spending shows a steep 1.8 per cent quarterly rise, against the initially estimated 0.5 per cent drop.

Yet City economists said that, despite these more optimistic developments, the national accounts again underlined the vulnerability of growth to a significant slowdown later in the year.

Ross Walker, of RBS Global Markets, noted that the data confirmed that one third of domestic demand was accounted for by big increases in stocks piling up on companies’ shelves, and the flattering effect of a sharp fall in imports — triggered by slower demand for goods — on Britain’s trading performance.

The impact of the credit squeeze on the City was also emphasised by separate balance of payments figures.

In Q4 the current account deficit — the broadest measure of the trade balance — shrank to £8.5 billion, or 2.4 per cent of GDP, after having stunned the City by leaping to a massive £19.1 billion, or 5.5 per cent, in the previous quarter.

However, economists noted that the improvement was almost entirely due to a precipitous £10 billion drop in earnings on investments by foreign companies based in Britain, which add to the deficit when they are sent back to these groups’ home base abroad.

The £10 billion figure was, in turn, mainly due to a decline in earnings on derivatives trading by foreign banks in the City.

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