EVERY adult in Britain has seen an average of £40,000 wiped off his or her wealth by the credit crunch.

The value of their property and equities has slumped 28 per cent since July 2007, when the credit crunch started, to the end of last month, according to an analysis by accountants Price Waterhouse Coopers.

The losses threaten to hit the economy hard as consumers rein in their spending. John Hawksworth, head of macroeconomics at Price Waterhouse Coopers (PWC), said: “The knock-on effect of this level of wealth destruction will result in significantly more belt tightening and reduced spending by households over the next year and this situation could be exacerbated by expected further falls in house prices over this period.”

The PWC study found the value of Britain’s housing wealth had fallen 20 per cent, from £4 trillion to £3.2 trillion, over the period in question. This equated to a loss of £17,000 for every adult in Britain.

UK house prices have fallen 19.7 per cent from their peak of £184,099 on average in November 2007 to £147,746 last month, according to Nationwide Building Society.

Meanwhile, the value of equities, including those held indirectly in pension funds, has fallen 40 per cent from £2.8 billion to £1.7 billion – or £23,000 for the average UK adult.

PWC estimated that the £1.9 trillion fall in UK wealth could reduce annual spending by around £45 billion, or around 3 per cent of gross domestic product.

However, there are tentative signs that property and equity prices may have found a floor. Anthony Bolton, president of investments at fund manager Fidelity and previously one of the country’s top stock pickers, called the bottom of the stock market last week – although he said the same thing in October last year before a sell-off in November.

He said: “My strong message [for investors] is don't give up now, you're giving up, you know, really at the last fence.”

Meanwhile, The National Association of Estate Agents said there were signs of recovery at the top and bottom of the property market, where prices rose last month.

Hawksworth also saw reason for optimism. He said: "As we begin to see the positive effects of recent interest rate cuts, planned money supply increases and fiscal stimulus measures coming through, we would hope to see a gradual economic recovery taking effect later in 2010 and beyond.”

Interest rates have been cut to a record low of 0.5 per cent in this economic cycle and the Bank of England is now embarking on a process known as ‘quantitative easing’, whereby it buys up gilts from institutions such as banks in the hope that the extra cash will get the economy moving again.