VAT increase 'could affect consumer confidence'

Date: 15th June 2010

Small businesses in the UK could be among those to be affected by "crumbling" confidence among British consumers.

A recently-published report by uSwitch.com has revealed that 50 per cent of Britons are concerned about finances and one in five is turning to debt to get by.

The report said that confidence could dip even lower should next week's emergency Budget include an increase in VAT.

Should the rate rise from 17.5 to 20 per cent consumers will look to reduce their spending in a number of ways, according to the report.

Cutting back on luxuries (59 per cent), buying cheaper alternatives (55 per cent) and rethinking big purchases (51 per cent) were all mooted as ways to reduce spending.

Cutting back on eating out and postponing holidays were also highlighted as ways of offsetting a rise in VAT.

Ann Robinson, director of consumer policy at uSwitch.com, said: "Consumers are fully aware that this government's attempt to close Pandora's Box and to clean up this country's finances is going to be painful.

"Millions are struggling to make ends meet and in normal circumstances we would be looking to the government to help ease the burden. Instead, it's inevitable that they will have to take more money out of our pockets."