The VAT rise has had a "noticeable" impact on spending habits, with two out of five people cutting back on buying goods since the start of the year, according to a report out today.
A survey of over 2,000 adults by online sales giant eBay found that over half had less money to spend, blaming Government policies, although many held the previous Labour administration responsible.
Half of those questioned said there had been a noticeable impact on their cost of living because of the higher rate of VAT, and most feared that tomorrow's Budget will further hit consumer spending.
Clare Gilmartin, Vice President of European Marketplaces at eBay, said: "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.
"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 small and medium sized enterprises 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."
