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% could provide the average UK adult with extra spending power of £562* per year. With NFU Mutual’s survey showing that 51% 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% would spend on food and drink grocery shopping, 17% would spend on holidays abroad, 16% would spend on eating out, 16% would spend on holidays in the UK, and 15% would spend on the high street.
Most, 47%, would spend on buying more items or doing additional activities, rather than buying higher quality items or doing more expensive activities (31%).
Frank Woods continued: “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% of people would save the extra money, and 14% would spend online, which could include spending in businesses based around the world, alongside 17% 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.”