Posted by: Hpratley , 05 January 2011
VAT reached a record high this week as it was raised from 17.5% to 20%.The Government’s aim is to raise £13bn from the increase.
The 2.5% increase will mean an item costing £100 before tax will increase from £117.50 to £120.
Some big names, including Debenhams, Marks & Spencer, John Lewis and Tesco have promised to absorb a proportion of the increase for as long as possible.
Primark, Next and other leading clothing retailers have warned that the escalating cost of cotton will force them to increase prices, regardless of the VAT rise.
Amazon said it would immediately increase the price on all eligible items to reflect the full VAT rate.
The big retailers are likely to take a ‘wait and see' strategy, and will look to hold down prices and take the hit to their profit margins for at least a week or two. However by the end of the month the majority of the prices are likely to be in place."
Business groups have predicted that it could have a damaging impact on companies at a time of tentative recovery. Do you agree?