Half of Britons fear rising food and energy bills more than recession as the credit crunch bites, according to research by the Association of Investment Companies (AIC).

This is echoed by a third of active investors, who have joined the mainstream general public in saving more and spending less.

An AIC poll also revealed more pessimism over the housing market, with only 5% of the public believing it will perform better than equities, compared with 27% last year.

Although a third of active investors are planning to increase investments in the next few months, most said it is because recent market falls represent a buying opportunity.

Blue-chips are now considered the safest haven, with resources (including oil) a close second. "Green" investing is still popular, with over half of investors saying global warming might or would definitely affect their investment decisions.

Annabel Brodie-Smith, communications director of AIC, said the fall in investor confidence is "not surprising" given the recent financial turmoil.

"The UK's love affair with property is over and they are gloomy about the housing market's prospects over the next year," she said. "Active investors are relying on blue chip stocks in these volatile markets."

She said investors need to take a long-term approach, and that those concerned about the possibility of further market volatility should consider regular investing over the coming year.

"Regular investments smooth out the highs and lows in the price of shares because you buy less shares when prices are high and more when prices are low, taking away much of the risk of market timing," she added.

The AIC investor confidence index surveyed 2,170 British adults and a further 1,249 private investors.

Copyright © PA Business 2008