Brits to avoid spending in New Year due to VAT rise

Seven out of 10 Brits will be reconsidering making big purchases next year, such as buying a car, because of the 2.5% VAT increase that comes into effect on 4 January 2011, according to research from price comparison site Gocompare.com.

The survey of 3,000 UK adults also shows that almost two thirds (61.1%) expect a very difficult year financially in 2011, with 22.1% stating that the biggest financial worry in the new year will be the rising cost of living and bills.

While most of us expect the increase in VAT from 17.5% to 20% to have an impact on our spending habits, many people have already been delaying big purchases over the last 12 months. Over a quarter of us (25.53%) have avoided moving house, 21.2% have put off buying a car and 30.37% have elected not to take a foreign holiday. Job security in 2011 is also a big worry for a large proportion of the adult population, with 31% stating that they fear losing their job or not being able to find enough work.

John Miles, business development director at Gocompare.com, commented, "It looks like many of us will be tightening our belts even further in 2011 as money woes continue into the new year. While the 2.5% VAT increase is unlikely to be welcomed by most people, and retailers will undoubtedly pass this on to consumers, the true cost is actually rather small. That said, the rise is coming at a time when a lot of people are anxious about their jobs and the general rising cost of living, and all these factors combined are making financial matters a big worry for large swathes of the population.

"While the VAT increase can't be avoided, people can take control of their finances by making sure they aren't paying more than they need to for things like car insurance, home insurance and energy. You can choose who you buy these essential services from, and it's important to shop around to get the best deal for you."