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A bid by the government to kick-start the economy with a 2.5 per cent cut to shopping taxes seems to have started paying off in the home improvement sector.

Last Monday Chancellor Alistair Darling announced the VAT cut in his pre-Budget report in a bid to encourage consumers to spend more and boost the economy.

And it seems that the tactic may be working. While sales are still broadly down on this period last year, they are well up on last month, as would be expected with Christmas approaching and the economy functioning normally.

Department store John Lewis, which trades extensively in homewares, has reported improved Christmas trading and a record week for online shopping.

Elsewhere Marks & Spencer, another retailer with a big homeware department and a dual presence on the high street and online, has been holding 20 per cent off sales.

It has kept many stores open until midnight to tempt customers into taking advantage of special offers.

Elsewhere, Debenhams has dramatically cut prices while administrators for Woolworths reduced some prices last week by up to 50 per cent.

One casualty of the looming recession has been furniture retailer MFI which was forced to call in administrators in October.

And Kingfisher, Europe’s largest home-improvement retailer and owner of B&Q, has reported a decline in its third-quarter UK sales.

The company warned that consumer confidence had been shaken across all its markets.

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Homeowners around the country are taking their properties off the market and making improvements to them instead, according to a survey by Lloyds TSB.

New kitchens and bathrooms are the changes most likely to increase the value of a house, the survey discovered, with extensions less successful and the least improvement coming from loft conversions and a simple redecoration.

Property TV presenter Phil Spencer said: “The current cooling of the property market is making homeowners think twice about selling up and many are opting to improve instead.”

Lloyds TSB released the figures as part of its push to sell personal loans, but the news still gives useful information showing how householders are reacting to the growing lack of confidence in the economy.

Its survey of more than 500 estate agents found that more than half had experience of customers changing their mind about selling their homes and choosing to improve them instead.

Of the 1000+ householders it spoke to, almost 60 per cent said they’d cancelled plans to sell - and half of those plan to do their home up instead.

Many of those are having to do work that will make it easier to stay in a house that no longer meets their needs, but rather more are hoping to increase the value for a future sale.

Lloyds TSB’s director of personal loans, David Wishart, said the bank had seen a recent increase in home improvement personal loan requests.

He said: “For the last decade homeowners have been able to sit back and rely on rising property prices to increase the equity in their home but sadly this is no longer possible.

“If you want to trade up and avoid substantially increasing your mortgage, you’ll need to add value to the house you’re currently in.”

The survey comes in the wake of a similar one by home insurers Liverpool Victoria (LV), which found that more than £4bn is being spent on home improvements during the current 18-month period by people who have changed their minds about selling.

Average spend is likely to be about £5000 - but almost half the householders surveyed plan to save money by either doing the work themselves or bringing in family members.

LV spokesperson Emma Holyer said: “Despite the challenging housing market and lack of affordable mortgages, we are still a nation obsessed with our homes and what money we can make on them.

“Many homeowners told us they were spending this money so they could profit more on their homes when they do come to sell them after the market has stabilised. This shows that although people are concerned about the short term housing market there does appear to be optimism in the long term.”

Which way is consumer spending going? Will the home improvement market expand or contract in the months to come?

One school of thought believes that DIY might get a shot in the arm from uncertainty about the housing market, saying that householders are choosing to improve when they can’t move.

If this sounds appealing, then what’s the best approach to take to maximising the value and enjoyment you get from your living space? Here are Times writer Kasia Maciejowska’s tips for 10 great ways to add value to your home:

Top ten: Home improvements

MOVE or improve? A familiar question if you’re faced with lack of space, a growing family or itchy feet. With 58 per cent of us improving our homes over the past year (12 per cent more than the year before), we prefer making do to moving out.

Faced with high house prices, the popular solution is to expand or improve with the aim of adding value – and now younger people are getting involved, with 68 per cent of people between 18 and 34 investing time and money in doing up their home.

So how to achieve that extra £100,000? A fifth of improvers think a kitchen extension will add the most value, although the most common project is redecoration, making up two thirds of all home improvements. Here we give ten of the best projects to make the most of your home.

Valuers at Halifax say an extension is the top option for adding value, as long as work is properly carried out. For structural projects employ a professional to ensure you comply with planning regulations. A good extension should create at least one extra room and be used to bring light into the house.

A loft conversion is the second most profitable option. While maximising existing space, it can increase the number of bedrooms and bathrooms, two key valuation factors. Read full article here…

Are you dreaming about banishing Britain’s grey skies in favour of exotic sun and sand? And, if so, will you be foregoing home improvements to pay for your summer break?

That’s the suggestion made in a BBC Online article this week. Mind you, they are quoting a spokeswoman from the Association of British Travel Agents. Perhaps if they’d spoken to someone from a major DIY chain it would have been a different story altogether.

Still it’s an interesting point. What will be people’s spending priorities in 2008?

With an expected downturn in the UK property market, as discussed in this article on the Easier Property website, home improvements are going to look like an increasingly attractive option for people who feel unwilling or unable to sell up and move on.

We reckon it’s probably too close to call at the moment - but we’ll be watching the business pages with interest…

Is holiday fever going to spread?

Perhaps it is the winter chill, or maybe the fast disappearing memory of Christmas, but at this time of year our thoughts turn to summer holidays.

Booking season starts in earnest after the first pay packets of the year arrive.

But will families be digging deep for a place in the sun as rising fuel bills start to land on the doormat, credit is harder to come by and house prices stall?

They already have been, according to Frances Tuke, spokeswoman for Abta. She says Abta members have been reporting a very busy January and February, although there are no figures yet to back this up.

“People will find a way to pay. They tend to cut back on things on home improvements and still go on holiday,” she says.

She predicts that spending on foreign travel will stay around the same this year as in 2007. Read full article here…