03 Mar 2021
Posted in Consumer
UK Government wields its ‘fiscal firepower’ to encourage consumer spending
Following today’s unveiling of the Budget 2021 where Chancellor Rishi Sunak declared significant help for small businesses and consumers;
George Henry, Consumer Analyst at GlobalData, a leading data and analytics company, offers his view:
“The government has announced a swathe of measures designed to encourage consumer spending in both online and retail channels. According to GlobalData’s latest 2021 Q1 consumer survey, one third (35%) of UK consumers somewhat or completely agree they have cut out certain product items due to budget restrictions. Therefore, the extension to the VAT cut and frozen duties on alcohol will enable the hospitality sector to breathe more easily after a devastating past year.
“Sunak also announced an increase of the contactless payment limit to £100, a more than 100% increase on the £45 limit introduced last year. The high uptake and familiarity amongst consumers will have the government hoping its new higher limit will encourage higher spending in retail stores, due to the advantages of quicker transactions and shorter queues at the checkout.
“However, it’s not only on-trade sales that this announcement aims to boost. The launch of a £520m Help to Grow scheme for small and medium businesses (SMEs) will offer advice to improve digital capabilities, as well as providing 50% discounts off approved software, acknowledging the growing supremacy of online channels and how consumer behaviour has adapted during a time of severe market disruption. The significant outlay demonstrates that the government anticipates online shopping to become long-term entrenched behaviour that will remain long after the pandemic subsides.
“The tactic of ‘spending your way out’ of a recession can appear risky, especially while interest rates remain at historic lows. However, integrated support for SMEs should provide a positive outlook going forward. Funding for digital services will help SMEs access a wider client base as e-commerce platforms boom in popularity. These reveal benefits for both retail and consumers alike as the UK exits lockdown for an increasingly online-centric economy.”