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Retailers concerned about VAT increase

Retailers in the UK have today voiced their anger at an increase in VAT from 17.5% to 20% at a time when most retailers are preparing themselves for the pre-Christmas rush. There are warnings aplenty today that the rise in VAT, although not wholly unexpected, could potentially derail any UK economic revival in the short to medium term by taking money out of the economy. So are things really as bad on the high street as some retailers would have you believe?

There's no doubt that life on the UK high street is still very tough for many, with balance sheets often stretched to the limit and cash flow now becoming an issue. An increase in the VAT rate will certainly separate the stronger retail outlets from the weaker retail companies and we could see a number of failures in the short to medium term. While individuals in the UK may not take an awful lot of notice with regards to an increase of 2.5% in the cost of the goods, when you multiply this across the whole consumer sector it does begin to have an impact.

Many business leaders are angry that the Conservative party and the Liberal Democratic Party both appeared to suggest that an increase in VAT was not on the agenda in the run-up to the last election.

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