How the VAT rise impacted sales on eBay UK

In advance of the UK Budget announcement which the Chancellor will present tomorrow, eBay have just released some internal data on how the recent VAT changes affected consumer spending. Whilst January’s VAT rise had a profound impact on consumers’ short-term spending behaviour, overall sales in February (thankfully!) returned to normal seasonal levels.

The eBay data for big ticket items shows that average sales of dishwashers in December (when compared to November) usually increase by 12%. However, last December, the increase was a whopping 40%, and while January tends to see a small increase of 7%, this January actually saw a drop of 7%.

Similarly, sales of fridges and freezers usually rise by 9% in December, but last December sales rose by 37% and dropped by 12% in January. Figures from this February show sales are levelling, with fridge and freezers up 6% (on January sales) and dishwasher sales decreasing marginally by 4%.

The findings of a recent eBay survey of 2,000 UK adults provides further evidence of this behaviour shift. However, UK shoppers are still feeling the pain and with the impending Budget, any more announcements could threaten fragile consumer confidence:

• 49% said that January’s VAT increase has had a noticeable impact on their cost of living
• 40% now budget in order to ensure they can afford basic necessities – almost half of women say this (47%) compared to only a third of men (33%)
• 41% have intentionally reduced their spending since the rise
• Over half of those surveyed (54%) have said that as a result of the Government’s economic policies (which include January’s VAT rise) they now have less disposable income available
• Consumer discontent is high with over two thirds (68%) thinking the upcoming Budget will further hamper consumer spending

According to the results, UK consumers place the blame for the increased strain on their finances squarely on the shoulders of the Government – 57% hold the previous Labour Government responsible, and 40% find the current Coalition Government at fault.

“While the recent VAT rise only had a short-term negative impact on consumer spending, we know consumers are still feeling the pain as they are budgeting to ensure they can afford basic necessities. Although sales figures are rebounding, consumers are becoming more careful with their money, suggesting they appreciate the importance of shopping around for the best value items.

The next couple of weeks will be crunch time for retailers who will be keeping a close eye on consumers’ response to the Budget, and both SMEs and consumers alike will be hoping there are no surprises that could harm the fragile state of consumer spending. The Government should focus on measures that will boost confidence, and in turn spending.”
Clare Gilmartin, eBay VP European Marketplaces

Have you noticed unseasonal rises and falls in sales over the last quarter? Did your sales go up in advance of the VAT rise and did you see a significant fall in sales post the VAT increase?

What steps do you think the government could (or should) put in place to encourage consumer spending and to invigorate the economy? Should they be looking at taxation, fuel prices, public spending/saving or are there other ways they can put an end to recession and boost the economy?