Sainsbury warns against potential VAT rise
Justin King, the chief executive of J. Sainsbury, has today warned the incoming UK government to refrain from increasing VAT amid speculation it could be an option considered by David Cameron's coalition government. There is intense speculation that VAT could be increased to 20% in order to replenish the UK coffers but this could stunt growth in the short term and potentially push the UK economy back into recession.
While an increase in VAT could raise as much as £11.5 billion it is the medium-term damage to the UK economic prospects which seems to be bearing most in the minds of retailers. Despite the fact that officially the UK has left the recession many believe that that UK economic recovery is perched on something of a knife edge at the moment. There is no doubt that confidence is very low with regards to the immediate future and until consumers and businesses become more confident about the long-term prospects for the UK economy we are unlikely to see a major bounce.
Over the next few days we will see many lobbying groups pushing their own case to the UK government at a time when uncertainty and confusion about the coalition government's policies are at their highest.
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