Research from commercial insurer, NFU Mutual, has found that over half of consumers would be likely to spend the extra savings, gained as a result of a VAT cut, if it is announced in the Chancellor’s Budget.
A cut in VAT by 5 per cent could provide the average UK adult with extra spending power of £562 per year. With NFU Mutual’s survey showing that 51 per cent of consumers would spend this extra money as a result of VAT savings, British businesses could look forward to a potential cash injection of up to £15bn.
Frank Woods, Retail Sector Specialist at NFU Mutual said, “if Britain is to defend its heritage as a nation of shopkeepers, businesses need real support to keep afloat. Retailers need a Budget with a long-term solution that lifts confidence in spending so we can keep the vibrant social spaces of the country alive.”
The research found that 23 per cent would spend on food and drink grocery shopping, 17 per cent would spend on holidays abroad, 16 per cent would spend on eating out, 16 per cent would spend on holidays in the UK, and 15 per cent would spend on the high street.
Most, 47 per cent, would spend on buying more items or doing additional activities, rather than buying higher quality items or doing more expensive activities (31%).
Frank added, “while we would hope for increased spending confidence, there is no guarantee that the spending power would be ploughed back into businesses in the UK. Our research showed 39 per cent of people would save the extra money, and 14 per cent would spend online, which could include spending in businesses based around the world, alongside 17 per cent spending on holidays abroad. While the overall Budget is expected to support growth, any boosts such as a cut in VAT could also be offset by increases in other taxes, meaning that savings aren’t necessarily felt.”