Retailers warn tax hike threatens sales recovery

RETAILERS yesterday warned the rise in VAT would dent a recovery on the High Street, but won an important concession by convincing the Treasury to delay its introduction until 4 January.

Treasury sources said the chancellor had taken into account the “hoo hah” experienced by the industry when the last change in VAT was enacted almost immediately.

Osborne also agreed with retailers that said an immediate rise would hurt the recovery.

“Introducing an increase in VAT this calendar year would not be economically advisable. We think the recovery will be stronger by 4 January,” an aide said.

Retailers and other traders fear that the hike to 20 per cent will threaten to scupper the progress made since the recession which saw a belt-tightening from cash-strapped shoppers.

BRC director general Stephen Robertson said: “We didn’t want a VAT increase. It’ll hit jobs, consumer spending, the pace of recovery and add to inflation.

“It’s some consolation that the range of VATable products isn’t being extended.”

Experts have estimated that retailers will be hit to the tune of billions of pounds as goods go up in price.

Richard Fleming, UK head of restructuring at KPMG, said: “With VAT now confirmed at 20 per cent we could see consumer spend drop by billions. Small comfort perhaps but retailers will be breathing a sigh of relief that they have until January to implement the change.”

Retail sales have been rising – with London outstripping other parts of the UK as foreign tourists have flooded to West End stores.