Retailers could benefit from tempting customers with promotional labels after a survey highlighted the impact of the recent VAT hike on people's spending habits.

According to a survey by eBay, 41 per cent of people have moved to cut their spending following the 2.5 per cent increase in VAT in January 2011.

Figures also showed that 54 per cent believe they have less disposable income as a result of the tax hike, while 40 per cent are having to budget so they can still afford the bare essentials.

Retailers and manufacturers may therefore have to consider additional ways of attracting the attention of cash-strapped consumers, such as adding coupons and expanded content labels to their products.

Clare Gilmartin, spokeswoman for eBay, commented: "Consumers are still feeling the pain as they are budgeting to ensure they can afford basic necessities."

The latest figures from the Office for National Statistics show that the consumer price index rate of inflation rose from four per cent in January 2011 to 4.4 per cent in February.

Denny Bros Ltd, 22 March 2011