Smaller retailers will be among the worst hit by the UK Government’s controversial move to increase VAT to a record high.
That is according to a Dundee business leader who believes that a number of local shopkeepers are less well placed to absorb the cost of the VAT and fuel rises compared with their larger rivals.
The UK’s top rate of VAT has gone up from 17.5% to 20%, which is expected to generate £13 billion and aid the country’s economic recovery.
Already heavily criticised by Labour MPs, the measure will see a few pounds or pence added to the price tag of most goods and services that are subject to the standard rate.
The Dundee and Angus branch of the Federation of Small Businesses (FSB) say the hike will most likely leave small retailers counting the cost.
Branch vice-chairman Charles Goodall said the rise would have a “massive impact” on traders and had increased the pressure on already hard-pressed firms.
He said, “It’s not just the cost of VAT going up the fact that fuel is going up means that transport charges will go up as well and that has huge knock-on effects on small traders.
“They will have to meet higher costs before they try and retail their goods. They already have had a tough time for the last year.”
But Alan Mitchell, chief executive of the Dundee and Angus Chamber of Commerce, said it was too early to say what the impact would be on businesses in the area.
He said, “People are uncertain about their future prospects so they might not go out and spend on, say, a new kitchen when they are unsure about their work.”
Crowds of bargain hunters undeterred by the tax rise continued to fill city centre stores on Tuesday as the traditional January sales got into full swing.
This burst of trade has left many shops with an optimistic outlook for the coming 12 months.’Short lull’Women’s fashion shop New Look, in the Wellgate shopping centre, has seen strong sales over festive period.
Store manager Kim Stewart said, “It has been really busy and I can’t see the VAT rise really hitting us.
“It will be places like electrical stores which could see the difference.”
Yeomans Outdoor Leisure, also in the Wellgate, has found fewer customers have been dropping in post-New Year.
But assistant manager Gavin Wares said he does not believe this is down to shoppers being deterred by the VAT increase.
“I wouldn’t imagine that we will be hit too badly by this,” he said.
“An increase on our stock is not going to make too much of a difference, but I think your high-price items, like electrics, will be hit.”
One of Europe’s leading electrical suppliers, Dixons Retail plc, operates in the sector believed to be one of the big losers of the tax rise.
But a spokesman for the organisation, which owns PC World and Currys among others, told The Courier they do not envisage a long-lasting drop in trade.
He said, “From experience we do tend to see a small sales hike before the increase, followed by a short lull afterwards.
“We’re taking a phased approach to the VAT rise, with a wide range of great deals still in store and online to entice customers to continue shopping.”‘A disgrace’On city centre streets a number of shoppers have been angered by the new 20% rate.
One of those was a Miss Lackie from Longforgan, who said, “Once again it is the working classes who have to pay the price.
“It’s about time that politicians and high-flying bankers give up their bonuses and lavish lifestyle to do their bit.”
Maureen Charlton (70), a retired dental nurse from St Mary’s, said, “I just think it’s a disgrace especially for people that have got children.
“It means I’m going to have to cut back quite a lot.”
Barrhead Travel, on the High Street, say sales have been very strong a trend which is expected to continue.
“People look forward to a break in the sun, especially on the back of a harsh winter which we are having,” said chief executive Sharon Munro.
“I believe families will continue to take holidays and make savings in other areas in order to do so.”