Muted response to VAT hike
Published: 15 July, 2010
January rise in VAT will hit consumer confidence, warns JLL
The rise in VAT from 17.5 to 20 per cent, effective from January 2011, was passed in a Commons vote with a government majority of 75 votes. According to Jones Lang LaSalle’s Head of UK Retail Guy Grainger it is likely to further dampen consumer confidence.
“The decision to increase the standard rate of VAT from 17.5% to 20% brings the UK in line with other European markets,” said Grainger. “But retailers have seen this coming and many will have already factored it into their budgets. Rising operating and supply costs will remain the larger worry and the reality is that these would have had to be absorbed by price rises later in the year in any case.
"Consumer confidence will inevitably dampen in light of the VAT rise and this will of course filter through to retail sales, but again it may not be as bad as it seems as shoppers are already being far more conscientious with their purchases. Consumption patterns are already one of general austerity.
“It is also encouraging to see that VAT has not been extended to those products currently exempt such as food and the delay in the VAT hike is good news for Christmas 2010 as consumers will bring forward their major purchases,” Grainger copncluded.
