Retailers contain effect of VAT hike
Wednesday February 10, 2010
A new report shows that many retailers have contained the effect of the recent VAT rate increase.
According to a study by the British Retail Consortium and Nielsen, January’s VAT rate increase was lost among the high number of discounts and promotions offered by retailers across the country.
The BRC-Nielsen Shop Price Index shows that non-food price inflation was 1.9 per cent – much lower than expected because many shop owners held off passing the extra costs brought on by the VAT rate increase to their customers.
Weakening consumer demand, spurred on by uncertainty about economic recovery, has stoked fierce competition between retailers, which is also playing a part in keeping shop prices down.
Mike Watkins, senior manager of retailer services at Nielsen, said: “With weaker shopper demand after Christmas and many retailers holding back or absorbing the VAT increase, it is no surprise that the shop price inflation is broadly unchanged this month.”
He added that with many seasonal promotions coming to an end, retailers will have to work harder to persuade customers to part with their cash.