UK marketers may need to rethink New Year campaigns and tailor media schedules accordingly after a study released today estimated consumers will be worse off to the tune of £6.2bn when VAT rises to 20% on January 4th 2011.

And according to the Affordability VAT Report from leading integrated marketing expert Acxiom, seemingly comfortable consumer groups will be unexpectedly hit by the 2.5% sales tax hike.

While low income groups will continue to struggle and higher earners should be cushioned from the increase, the report digs deeper to a household level and concludes that ‘comfortable’ consumers could have their spending power impacted by the rise.

Total UK household expenditure will increase by £6.2bn, and consumers will also suffer a collective drop in discretionary income – the amount of money people have left to spend after legal outgoings such as mortgage and Council Tax have been paid – of £2.3bn. The average UK household will be £225 a year out of pocket, with this figure rising to £448 for some groups.

The worst affected groups include: married pensioners; married couples living with grown-up children; and childless couples aged 25 to 34.

The hardest-hit areas of the UK have been identified as Hull, Gwent, Stoke-on-Trent, Leicester and Middlesbrough, which will all bear the brunt of price rises. The report also goes into greater depth about how specific regions will be affected: Wales and the East Midlands will suffer most.

Acxiom’s Affordability product, used to calculate the findings of the VAT report, provides unique insights into the spending habits and budgetary constraints of every UK households, making the VAT report more in-depth than any other survey available. Using Acxiom’s market-leading lifestyle database, marketers can analyse their target audiences at a granular level, by household group and location, to gain critical insight into which people should receive campaigns, who will have less to spend, and who is at risk of falling into debt or requiring more credit.

The report is useful for marketers in specific industries as it will help companies in the financial, telecoms and utilities sectors identify which households will be the most stretched and more at risk of defaulting on payments or cancelling contracts.

Stephen Whyte, Acxiom Europe CEO, said: “The VAT rise of 2.5% may seem insignificant, but is actually going to have a major impact on many UK households’ finances.

“For marketers, Affordability gives a unique insight in that it shows the effect of the increase not just at a national or regional level but at household level. This throws up some interesting detail of who is really going to be impacted by the VAT increase. Our Affordability analysis is helping brands plan campaigns to ensure budgets are not wasted on targeting the wrong consumers.”

ENDS

For further information or to receive a copy of the Affordability Report, contact Ian McCawley on 020 7526 5209 or 07585 900889 or ian.mccawley@acxiom.com

Published on: 5:08PM on 7th December 2010