The British Retail Consortium today said it was “nonsense” to suggest retailers would use the VAT rise in January as a cover for price increases.
The retail body was angered by KPMG research suggesting 60% of retailers and consumer products manufacturers planned to raise prices by more than the 2.5 percentage point VAT increase that comes into force on 4 January.
BRC argued that in these bleak economic times retailers were “doing all they can” not to pass on inflationary pressures to consumers and that this was likely to continue after 4 January.
“Retail is going to be even more competitive in the New Year as consumers rein in their spending in the face of pressure such as public-sector job cuts,” said BRC spokesman Richard Dodd.
This is a wonderfully simplistic view of large retailers acting solely as consumer champions doing everything in their power to save the humble shopper a few quid. What it does not reflect however is the other side of the retailing coin, on which retailer’s have to keep delivering increasing sales and profits numbers in order to keep shareholders and owners happy. When retailer’s profits start hitting the hundreds of millions and even billions its hard to see them in the role of Santa Claus or Robin Hood.
Retailers of course have to be seen to be offering consumers the best value - but this in no way means that they will be offering the cheapest products they can across the store. Whether the findings of the KPMG research turn out to be true or not - this is an area in which retailers have some form.
And we don’t have to look very far back to find it. This January, when VAT returned to 17.5%, The Grocer tracked 12,500 price increases across the big four. Of these, 4,500 were for more than simply VAT.
Of course there were price cuts as well - but lets not kid ourselves that the consumer is all that retailers are worried about. If they do keep prices down this time around then great but if they don’t - then it won’t be hard to spot.
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