The retail is the sector set to benefit most, with over half (58 per cent) of those likely to increase some spend using the cash to purchase items such as clothing, electrical goods and home and DIY products. High street (51 per cent) and online stores (49 per cent( could benefit from increased spend almost equally, NFU Mutual said.
A cut in VAT by five per cent could provide the average UK adult with extra spending power of £547 per year. With NFU Mutual’s research showing that 67 per cent of consumers would increase some spend as a result of VAT savings and 58 per cent of these increasing spending in retail, British retailers could look forward to a potential cash injection of up to £11.2bn.
Frank Woods, retail sector specialist at commercial insurer NFU Mutual, said: "The encouraging sign is that there is clearly an appetite for increased spending in retail amongst consumers.
"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 £2.2bn could be ploughed into British retail business. With other announcements such as increased infrastructure spending seen as more likely, whether this opportunity can be delivered to customers and benefit UK retail businesses remains to be seen.
The 18-24 year old group were found to be most likely to spend (78 per cent), with retail set for a boost as the extra cash would be most likely spent on the high street (20 per cent) and online shopping (26 per cent).
Woods added: "There is however no guarantee that the spending power of consumers will be ploughed back into UK businesses. Our research showed increased online spending in 24 per cent of people, which could include spending on imported goods from around the world. While the overall Autumn Statement 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."