“VAT Change Will Be Used to Hide 8 Percent Price Rise”
In the January 3, 2011 issue of The Telegraph, Booz & Company Principal Jason Gordon (UK) said he expected most retailers to raise prices between 5 percent and 8 percent to counter an increase in the UK’s Value Added Tax (VAT). “The majority of retailers will ‘round up’ rather than ‘round down,’” Gordon said of the likely reaction of retailers to the VAT, which the government boosted January 1, 2011 by 2.5 percent. “There have been so many years of price deflation, retailers need to move up prices to stay profitable,” he added. “The pressure to increase prices has been building for some time, and that time has come now.” Retail analysts predicted most clothing price increases would go into effect gradually as the spring and summer ranges start entering the shops in mid-winter.