Budget: Cutting VAT Could Plough Billions into UK Businesses

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.”