Chamber comments on VAT rise

Money

VAT has risen by 17.5 per cent to 20 per cent in a government bid to boost tax revenue and cut the deficit.

The VAT rise has been described by the government as “necessary.”

Opponents of the rise have said the poorest will be hit hardest, whilst business groups say retailers will feel the increase the most.

Commenting on the VAT increase, Chris Fletcher, Deputy Chief Executive at Greater Manchester Chamber of Commerce, said: “Greater Manchester businesses will be faced with some harsh choices in response to the VAT increase, whether to absorb the increase and keep prices down or increase prices and pass on to the consumer the 2.5 per cent increase. Either way will see business profits potentially take a hit which could have an impact on investment and expansion plans.


The longer term impact of goods costing more coupled with the fuel duty increase could be an inflationary time bomb that could impact heavily on the economy.


Our members are really worried about inflation rather than the VAT increase and this is causing a few of them to hold back on investment into their businesses which could see a slowdown in any planned and much needed employment growth.


The unfortunate thing is that with the UK financial picture being as it is, this could be the option with least long term impact, but that still does not make it any easier when faced with price increases.”

Food, children's clothing, newspapers and magazines are not subject to VAT.