VAT verdict: we just don’t know

Today’s newspapers are full of reports about the confusion faced by shoppers, who are dealing with the different ways in which shops are treating the increase.

Some shops are reverting to the old rate, some have delayed the change and some – such as Philip Green’s Arcadia Group – have pledged to absorb it entirely.

Analysts admit they can’t tell if the VAT cut had a positive impact for several reasons, including the recession’s impact on shopping trends and the fact that retailers made much bigger cuts to prices anyway.

One thing they can agree on is that the administrative cost of lowering, and subsequently increasing, VAT has cost the sector millions of pounds in diverted manpower – especially because the changes took place at the busiest times in the shopping calendar.

Jason Gordon, retail director at Ernst & Young, said: “It is certainly extremely confusing. There are five or six completely different strategies currently being employed. And those strategies are quite likely to change.

“Across a lot of retail, with the VAT change happening right in the middle of a sale event, it will take at least another month before consumers are aware of what is really happening.” 

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