If the UK Government is serious about driving the economy forward in this post-Brexit climate, then reducing VAT is the key.
That is the verdict of
NFU Mutual, which found that two thirds of consumers would increase their spending if VAT were reduced. In fact, the survey suggested that as much as £19.3 billion may be ploughed back into UK businesses
Its research found that a cut in VAT by 5% could provide the average UK adult with extra spending power of £547 per year. With NFU Mutual’s research showing that 67% of consumers would increase some spend as a result of VAT savings, British businesses could therefore look forward to a potential cash injection of up to £19.3 billion.
Retail would be the sector set to benefit most, with over half (58%) of those increasing some spend using the cash to purchase items such as clothing, electrical goods and home and DIY products. High street and online stores could benefit from increased spend almost equally, with shares of 51% and 49% respectively.
“The encouraging sign is that there is clearly an appetite for increased spending among consumers,” said Paul Shattock, commercial sector specialist at NFU Mutual.
“With consumer spending coming under some pressure from rising inflation, the Chancellor’s decision to ‘reset’ fiscal policy could possibly include the option of cutting VAT by as much as 5% to support growth. Our research suggests that even in a more probable situation of a 1% cut, up to £3.9 billion could be ploughed into British business. With other announcements such as increased infrastructure spending seen as more likely, whether this opportunity can be delivered to customers and benefit UK businesses remains to be seen.”
The research found that over half of respondents that would increase spending (53%) would spend in UK hospitality industries on weekend breaks in the UK, eating out and hobbies and leisure. Over a third (36%) of spenders would increase spend on grocery shopping, for instance at the supermarket.
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