The Bank of England warned that families face nine years of saving in order to rebuild their personal wealth but admitted that there was no historical guide as to how the economy would react.

A Bank of England report claimed that as the economy begins to recover, families would need to save around 10% of their income for nine years if they are to return to the personal wealth levels of 20 years ago.

In a widely theoretical report, it was revealed that the household saving-spending ratio between 1995 and 2007 fell to historically low levels, fuelled predominantly by low interest rates, rising property values and easy access to credit.

But with personal debt now at record levels, personal wealth in the UK has been eroded, leading to the save-spend trend being reversed in the last year. The bank also warned that likely future tax increases, needed to service large public debts, are also influencing saver’s decisions.

But the Bank has raised concerns that there was no historical precedent as to how the economy would react to an increase in saving, with the report warning of what it describes as the “paradox of thrift”.

The fear is that as public saving increases and consumption decreases, the economy would once again contract. This would lead to a reduction in production, increasing unemployment and, in the worst case scenario, returning the economy into a recessionary state. It was that principle that fuelled many government initiatives during this recession to encourage consumer spending, such as the VAT reduction and the car scrappage scheme.

"Any attempt to reduce consumption is likely to push down on output and hence household incomes,” claimed the report. “That could actually make it harder for households to increase their saving - an effect know as the paradox of thrift."

Bank of England figures published earlier this month showed that in July the total amount of personal debt in the UK fell for the first time since records began in 1993 as people reduced their mortgage borrowing.