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		</div><p><a href="http://londonglossy.com/wp-content/uploads/2010/12/consumer-spending-expected-to-drop.jpg"><img class="alignnone size-full" title="Consumer spending is expected to drop by 0.5% in the first quarter of 2011" src="http://londonglossy.com/wp-content/uploads/2010/12/min-consumer-spending-expected-to-drop.jpg" alt="Consumer spending is expected to drop by 0.5% in the first quarter of 2011"/></a></p>
<p>Consumer spending is expected to drop by 0.5% or £354 million in the first quarter of next year compared with the same time last year following the VAT increase, according to a report.</p>
<p>Fewer than one in five retailers (18%) plan to pass on the full increase to customers by the end of January, but 95% expect to within three months, the study from price comparison website Kelkoo and the Centre for Retail Research (CRR) found.</p>
<p>The rise from 17.5% to 20% will cost the average household almost £520 or £212 for every man, woman and child in the UK and raise £13 billion for the Treasury, the report forecasts.</p>
<p>Consumers will reduce their annual spending by £324 per person following the increase, with 50% claiming they will spend less throughout the year, a survey for the study found.</p>
<p>More than a third of consumers (36%) have been buying early to beat the increase and more than half (53%) claim they will reduce their spending by a quarter in January alone, the poll revealed.</p>
<p>Kelkoo marketing director Chris Simpson said: &#8220;Retailers are facing a difficult start to 2011 and while it is widely recognised that urgent action is required to plug the hole in the UK&#8217;s finances, it is imperative to avoid a sharp drop in consumer spending as it could derail the retail industry&#8217;s fragile recovery from the recession.</p>
<p>&#8220;In the new year consumers will be left facing an increase in the price of everyday goods at a time when salaries are generally being frozen and unemployment is rising.</p>
<p>&#8220;Retailers have spent the last few months encouraging consumers to &#8216;shop now to avoid the VAT increase&#8217;. However, the combination of lower disposable incomes, higher prices and a reluctance to increase borrowing is likely to result in lower levels of spending, meaning retailers may have to endure a £2.2 billion fall in retail sales in the first quarter of 2011.&#8221;</p>
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