Asda has vowed not to add next year’s VAT increase to the price of its existing clothing lines when the rate returns to 17.5% in January.

Clothing chief Anthony Thompson said the supermarket would maintain the 15% rate for current lines, although new-season merchandise will be sold with 17.5% VAT.

The news comes amid continuing frustration among retailers that the government is increasing VAT over the new year – and mounting fears the rate could rise further after next year’s general election.

“My biggest concern would be that VAT goes up to 20%,” Thompson told the Mail on Sunday. “If that happens, there is a strong possibility you will start to see inflation coming through on clothing.”

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Dressed for success (analysis; 7 November 2009)