CONSUMER confidence has risen for the third consecutive quarter as people feel more positive about their job prospects and personal finances.

But the levels are still well below pre-downturn highs and half of respondents fear the UK will still be in recession by the end of 2010, while 70% are adjusting spending to save money.

The latest Nielsen-British Retail Consortium Consumer Confidence Survey published today also reveals that personal debt is the biggest worry for most people over the next six months, closely followed by the economy and increasing utility bills.

Concerns about debt levels resulted in 69% of people saying they put any spare cash they have, once they have covered their essential spending, into improving their personal finances.

This is a combination of increasing savings (40%) and paying off debts (29%) – with the savings figure the highest recorded since this survey began in November 2004.

Justin Sargent, Nielsen Consumer UK managing director, said: “We are in the foothills of what will be a slow climb out of recession.

“While people are feeling ever so slightly better about job prospects and personal finances, a definite air of caution prevails.

“The number of people saying they are saving is at the highest the survey has ever recorded and people remain very concerned about the amount of debt they are shouldering.”

He added: “Nielsen expects continued hardship in the leisure industry as more consumers cut back on going out.”

Stephen Robertson, British Retail Consortium director general, said: “We’re heading in the right direction. It’s encouraging to see consumer confidence improve steadily since the survey’s low last April.

“But we’ve still got a long way to go before confidence levels hit their pre-recession highs.

“Strong Christmas sales showed customers felt more confident about spending than they have for some time, but is that improved mood permanent?

“Customers are cautious about how their own finances will shape up in 2010, with the impending General Election adding to the uncertainty. They now want to cut their costs.

“That means spending less on things such as new clothes, saving on utility bills and buying more supermarket discount goods.”