Small business expects to bear brunt of VAT rising to 20 per cent
Tuesday 04 January 2011
Smaller companies facing a disproportionate hit from today's VAT increase are warning the Government to look elsewhere for the growth needed to pull the economy out of recession.
More than 70 per cent of firms surveyed by the Federation of Small Businesses (FSB) expect to be hurt when VAT rises by 2.5 per cent to 20 per cent today.
The measure will net the Treasury more than £12bn per year. But unless the Government raises the threshold at which companies have to register for VAT, private-sector growth cannot be relied upon to take up the slack from looming public spending cuts, they believe. "If the Government truly believes that the private sector is going to strengthen the recovery we need to see action," said John Walker, the national chairman of the FSB.
Economists are widely predicting that the new VAT rate will affect growth. Shops are particularly exposed. Retailers are already feeling the pinch from the pre-Christmas cold snap, with discounting set to continue into the new year as rivals fight to make up for lost ground. But price rises cannot be avoided forever.
One high street bellwether, John Lewis, has pledged to keep prices down for the duration of its sales, but some increases must come. Nat Wakely, the director of selling operations, said: "We have seen a previous VAT rise as well as import prices going up. So although we have absorbed a great deal of these costs, some prices will increase."
Among car retailers, the "pull forward" as customers rushed to buy before the VAT rise was felt only at the top end of the market, said Trevor Finn, chief executive of Pendragon, which owns Stratstone and Evans Halshaw. And makers of mass-market cars are likely to hold prices flat, offsetting the costs against currency fluctuations.
"If you're buying an Aston Martin the impact will be visible, but if you're spending £10,000 on a Ford Focus, the price will be the same because of discounting," he said.
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
Sony hack: Angelina Jolie branded 'seriously out of her mind' in further embarrassing leaked email saga
Panic Saturday: 13 million Britons spend £1.2bn – while 13 million others across the country live in poverty unable to afford food
iJobs Money & Business
£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...
£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...
£20000 - £25000 per annum + OTE £35000: SThree: SThree are a global FTSE 250 b...
£20000 - £25000 per annum + OTE £35K - £45K: SThree: SThree Group have been we...