Shops will be displaying the wrong prices today after retailers failed to change all their labels and tags in time for the emergency VAT cut. Major chains said the "mammoth task" of repricing each item in their stores could not be done. Instead, consumers will find a pleasant surprise when they get to the till and find they are charged less than stated on the shelves.
Despite claims from the retail industry that all major players will pass on the 2.5 per cent VAT cut, some may use the reduction, effective today, to increase their margins. They are under no legal obligation to lower prices.
As part of the pre-Budget report last week, the Chancellor, Alistair Darling, reduced the rate of VAT from 17.5 to 15 per cent, which will cost the Treasury £12bn over a year. Many types of food, books, newspapers and children's clothes, among other products, are zero-rated for VAT but other products are charged at the full rate. Given the sheer number of items in shops – an out-of-town superstore can have 50,000 – repricing goods has been a logistical challenge.
Britain's biggest retailer, Tesco, promised to pass the reduction to all relevant goods, knocking up to £2.50 off the average shopping trip but even it has not been able to reprice everything in time. "In the beginning, the reduction will take place when you pay at the till," a spokesman said. "It would be an impossible feat to change the tags on all the items we have in such short notice; we have over 2,000 stores."
The furniture chain IKEA said: "It is a big challenge for us to reprice all our products in all our outlets in time but we will have clearly visible signs and disclaimers stating that we are charging VAT at a lower rate." Argos said it could not guarantee all prices would be changed and, on its website, will apply the VAT cut at the payment stage rather than on individual items. At HMV, a spokesman, Gennaro Castaldo, said: "It's a major undertaking for us; we have millions of items in stock. Because we have so many items we will not be relabelling all of them immediately, but the reductions will take place when customers pay at the tills through our automated system."
Representatives of small firms such as newsagents, dry cleaners, cafes and pubs said the change had been a headache. "It is a struggle for the 4.7 million small businesses in this country to get everything ready," said Stephen Alambritis, head of public affairs at the Federation of Small Businesses.
"Most small businesses will have done one big pricing run a year so a lot of stock will already have been priced. There is no legal requirement stating shops have to change the price tags but they do need to show that VAT is only going to be 15 per cent to customers."
The Association of Licensed Multiple Retailers, which represents medium-sized pub chains, said its members expected to pay some £570 per pub to reprint menus and reprogramme tills. Across the UK pub industry, the changes would cost between £10m and £36m, it estimated.Reuse content