KPMG predicts VAT-busting price rises
RETAILERS are expected to raise prices above the 2.5% VAT increase in the New Year according to a report by the accountancy firm KPMG.
The firm, which interviewed senior figures from 200 large firms operating in retail, corporate, utility and technology sectors, found that 60% of those in retail plan to increase prices by more than 2.5% in January.
Some 40% of businesses in other industries plan to do the same according to the Paying The Price For Recession report.
Christine Hewson, head of retail for KPMG in the North West, said: “The economic downturn placed pressure on UK businesses to blanket discount, and the intention to raise prices is an understandable reaction.
“But, the timing must be right. In today’s price-sensitive market, any increases may well have a damaging effect on sales volumes. Firms need to understand the overall impact on profitability.”
The KPMG research shows that a majority of firms were forced to discount prices across the board during the recession. It now appears that many are looking to use the VAT increase to mask price increases.
The firm said large-scale price increases could risk damaging consumer confidence and economic recovery by causing an unexpected inflation spike on the high street at a time of fragile market conditions.
