Brits to cut down on spending in the New Year

British consumers are expected to be more prudent in the coming New Year after spending a record amount in the run-up to Christmas as well as Boxing Day as the economy is not expected to fully recover soon.

The cautious prediction was issued by economists who see the British economy growing slowly. Experts said that come mid-2010, whichever government takes control after the elections, deep cuts will need to be made to restore the UK’s finances.

Thousands of shopping centres across Britain saw spiralling sales this festive season. High street estimates have been bullish in recent days, with predictions that sales and special offers in the run-up to Christmas as well as Boxing Day could be as much as 15 or 20 percent ahead of last year, and well ahead of estimates.

On Monday, Credit agency Experian said that the number of shoppers rose by 17.9 percent on Sunday compared with the same day last year, setting the highest record for December 27. Even the British Retail Consortium made a bold prediction that 2010 would be “no worse” than 2009.

However, some sectors are saying that the planned tax hikes, reduction in public spending and the feared business failures and rising home repossessions next year could see a plunge in the retail sales sector.

The majority of retailers are optimistic that British consumers would likely continue with their spending binge at least in the coming days. From supermarkets to fashion chains, all forecasting a significant rise in sales this year compared with the same period in 2008.

The Christmas sales boom from the British public was boosted by a combination of a positive outlook that the economy is improving and aggressive marketing by retailers by offering big discounts, and the looming rise in VAT which will return to 17.5 percent on New Year’s day.

This week’s spending by the British consumers was largely influenced by the scheduled increase in VAT. The end of this boost will hit the high street at the same time as the annual January debt shock. Consumers, whose optimism is still fragile, will receive credit card bills from Christmas, prompting several months of austerity for many, before a growing economy restores that crucial driver: confidence.