The recession will have even more impact on people's mental health than on their finances, the Young Foundation think tank has found.

Its report states that while many people are suffering materially from the economic downturn, the harm to the population's psychological well-being is even greater due to the fear of job loss and financial worries.

Government policy

The report, Receding Tide, includes preliminary findings from a two-year study.

It says government policy focuses on the public's financial needs and not on their mental health.

Young Foundation director Geoff Mulgan said: "The recession is already becoming visible in the form of job losses, business closures and repossessions.

Stress and depression

"But the invisible effects that take the form of stress, depression and helplessness are likely to be just as damaging and require very different responses.

"Policy makers need to become much smarter at understanding who's coping and who's not."

To read Receding Tide go to