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VAT reduction comes into force today

Today is the first day of the 15% VAT rate in the UK and while many are pinning their hopes on increased consumer spending because of the saving, the jury is still very much out. There are high hopes that consumers will use the 2.5% saving to further increase their spending on the high Street and assist the industry through what is a very difficult situation.

The VAT reduction together with a number of other fiscal initiatives is one of the final throes of the dice from the UK government as the UK heads into what could be a very deep recession. If the government could somehow reduce the short sharp fall into recession there is every chance of a turnaround over the next 18 months. However, if the authorities are unable to stem the flow of reduced profits, reduced sales and increased unemployment the future does not look very rosy at all.

There is some confusion as to whether consumers are waiting for larger discounts just prior to Christmas or are they retaining their funds as cover for any further short-term requirements they may have. A number of "20% discount days" have failed to catch the eye of many consumers which has surprised some in the industry.

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