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British Retail Consortium concerned about VAT rise

The British Retail Consortium has issued a report today suggesting that an increase in UK VAT from 17.5% to 20% would potentially see the loss of 160,000 jobs and have a "long and deep lasting" effect on the economy. It is believed that the rumoured increase would also hit high street spending by around £4 billion which is money that retailers can ill afford to give away in the current economic environment.

Initial estimates suggest that an increase in VAT to around 20% would help reduce the UK budget deficit by over £11 billion but would lead to significant job losses in the short to medium term. When you also take into account the fact that it could tip the UK economy back into recession, place more pressure on the banking arena and ultimately see unemployment rise, there are risks associated with an increase in VAT. However, the very need to tackle the UK budget deficit in the short term, to give the UK economy a base for the future, would appear to be paramount at the moment.

The truth is that whatever action David Cameron and his government take there will be an upside and there will be a downside. The economy is still essentially on a knife edge although a softly softly approach will not help the UK budget deficit and could put the UK's credit rating at risk.

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