Jan 4th-VAT increase- So what!

  jack 10:35 02 Dec 10
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We are hearing the the impending VAT increase is bringing about a buying rush.
Is it, are you feverishly ordering you gizmo?
But why bother?
Yes the I/R will be collecting 2.5% more revenue from traders, but will it put the prices up?
With fierce competition out there on the high street and online will not most traders just swallow the increase into their margins to maintain trade share?
What do you all think

  Quickbeam 10:43 02 Dec 10

A lot of consumer goods are priced to what the retailer think we'll pay. So a Fridge priced at £199.99 with an acceptable profit will probably still be £199.99 as they will know that we think £204.99 is much more than only a fiver more.

Ones well less than £200 and the other's well over £200. That's the way that we think and they know it.

  Covergirl 10:48 02 Dec 10

. . . that they're not raising prices because of this VAT increase.
Whilst reassuring me on this subject, they WILL be raising their line rental by (another) 30p.

On the whole, twopence hapenny in the pound won't make much difference to most people until the purchase price starts to get well into four figures. That's IMHO by the way.

Plus there will be lots of high street incentives of "No VAT Increase" posters in the windows.

  Quickbeam 11:10 02 Dec 10

I can just see tomorrows headlines in the Chinese papers,
'PEOPLES REPUBLIC FORCED TO BAIL OUT UK BY PAYING THEIR VAT BILL!'.

  interzone55 11:56 02 Dec 10

All the stories in the press about panic buying are planted by marketing departments to make gullible people go out spending.

On the subject of price increases, O2 texted me last week to say they're putting up my line rental as of 4th Jan...

  peter99co 14:00 02 Dec 10

I have reduced my 03 bill by electing to receive a text rather than a post bill.

  gengiscant 14:32 02 Dec 10

Rest assured at some time next year prices will rise and more than the 2.5 increase in VAT.
It will go something like, we absorbed the VAT increase but now with raw materials, manufacturing costs,etc rising, we are very sorry but we must increase our prices by 5+%.

Or is that just me being cynical again in regards to business?

  tullie 14:41 02 Dec 10

No you are not being cynical,prices across the board will rise.

  carver 15:45 02 Dec 10

You will start to notice the price of every thing going up by mid February, when you start on about VAT only affecting the price you see in the shop remember that there is about another 3 people all down the line getting hit by this VAT increase before the goods get to the shop.

  morddwyd 20:10 02 Dec 10

One commodity which will almost certainly go up by the full amount will be petrol/diesel.

That means just about everything else will go up, except wages, of course.

  HWJC 17:16 05 Dec 10

jack: Yes the I/R will be collecting 2.5% more revenue from traders, but will it put the prices up?

This is not true and it surprises me so many seem to misunderstand it.

Increasing VAT from 17.5% to 20% is an increase of 14.28% (1/7th) to the exchequer.

In the same way, a mortgage increase from, say, 5% to 5.5% is a 10% increase.

And if mortgage lenders increase their rates from BR+0.25% to BR+2.0% it's an 800% increase.

That said, our prices will remain the same as we price based on pre-VAT costs. It's more trouble than it's worth to relabel several hundred items. In the same way, we didn't reduce prices when VAT temporarily went down the other year either. That was intended as a saving for business to keep people in jobs and we used it as such. Consumers always think it's about them - one of the great misunderstandings of the last 12 months.

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