VAT cut to tempt shoppers

It’s hoped tax cut will woo consumers back to the high street in the wake of COVID-19

Tom Harrison
Content writer
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Posted 8 JULY 2020

In his summer statement Chancellor Rishi Sunak has announced a temporary cut in VAT in a bid to boost consumer spending.

Retail sales have been badly hit by the coronavirus pandemic, with non-essential shops, pubs and restaurants closed from March until earlier this month.

VAT has been cut in past financial crises to stimulate the economy: after the 2008 financial crash it was temporarily cut from 17.5% to 15%.

But this time, a cut in VAT may not be enough to get people out and into the high street again.

Commenting on Chancellor Rishi Sunak’s announcement that he will cut VAT to 5% and introduce an ‘eat out to help out’ discount in today’s Summer Statement, Anna McEntee, product director at, said:

“A cut to VAT may be welcomed by sectors of the economy which have suffered the most during lockdown, but our Household Financial Confidence Tracker suggests that a cut to VAT may do little to convince people to get out and spend. 46% said that slashing VAT would incentivise them to visit shops in person, but 52% said it would make no difference. Among those who are already unwilling to visit newly opened shops, only a third (33%) thought that cutting VAT might change their mind.

“While the Government’s additional measures to introduce a substantial 50% ‘eat out to help out’ discount could go some way entice people out of their homes and stimulate the restaurant sector, concerns around social distancing are still predicted to significantly impact areas such as retail.

“Increased comfort with shopping online suggests it will take some time before footfall picks up again and for retailers to start to see the benefits of an easing lockdown. Our research shows that 59% of people do not plan to go to these shops in person. Today’s tax cut alongside the Government’s rallying cry of “get out and shop”, looks easier said than done.”