HOWZAT

In times of plenty, wine was often the excuse for ostentatious expenditure – now it is the first thing people look to when they want to cut back. Jonathan Stephens, director of the fine wine merchants Farr Vintners, said that many City clients were now buying bottles for £50 or less, compared with £500 a few months ago. “Clearly, a softening of prices is being experienced at the moment. Wine is always an expression of people’s feeling of economic security,” he said.

Even cosmetic surgery does not seem to be quite the vital necessity that it once did. Patrick Bowler, from the Court House clinics, which have operations in Harley Street as well as elsewhere in Britain, said that demand for high-value surgical procedures had already dropped off. “A facelift usually costs between six and seven thousand pounds, whereas Botox treatment costs a couple of hundred – and that seems to be affordable,” he said.

Many restaurants are also experiencing lower bookings. One City source told The Times: “People are afraid to leave their desks because of all the redundancies, so they’re not going out to lunch as much.”

The effects of the financial turmoil will also be felt by those who have never met an investment banker in their life. Even people still lucky enough to have a job will find it a lot harder to get a mortgage or a bank loan.

Mark Dampier, head of research at the asset managers Hargreaves Lansdown, said: “The mortgage landscape has changed completely, and will remain changed for quite some time – maybe a lifetime. You used to be able to fill out an application form and get some money straight away. That will change quite significantly.

“We are going into a recession. Banks are not going to be willing to lend – they have got to recapitalise themselves. They are going to ration money.”

The good news, he says, is that inflation may start to come down – fuel prices are already on the way down – and that in his view the Bank of England will take the first available opportunity to lower interest rates. But that still won’t be enough to breathe life into the moribund housing market.

“House prices will continue falling,” he said. “They will fall another 15 per cent, making an overall fall of 25 per cent or even 30-40 per cent from their peak a year ago.”

Justin Urquhart Stewart, a director of 7 Investment Management, said that two of the questions he was asked most frequently this week were: what will happen to my savings? And what will happen to my pension?

Savings should be safe – under the Financial Services Compensation Scheme even if a bank goes bust savers will be paid back their money, up to £35,000 for individuals and £70,000 for couples. Pensions are a different story, however.

“If their pensions are dependent on the stock market, they will be suffering severely. But if they are based on a broad range of assets, then they will have suffered a bit, but not too badly,” he said.

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