The Scottish Grocers’ Federation (SGF) fears the increase in VAT from 17.5% to 20% announced by the Chancellor, George Osbourne MP, in the emergency budget, will place small shops at a further competitive disadvantage to the multiples as they will be unable to absorb a large increase in VAT. VAT will increase from the 4th January 2011.
John Drummond, Chief Executive of the SGF said:
“An increase in VAT not only impacts sales but also creates costly operational disruption. For a typical convenience store a VAT change requires price and signage changes on approximately 50% of the range.
“An increase on the 4th January 2011, which is a bank holiday in Scotland, will place a major bureaucratic burden on retailers during the busiest time of the year.
“Usually small retailers will attempt to absorb any increase in VAT to ensure customer retention. However, this large increase in VAT means this will only be an option for the largest retailers.
“We do welcome plans to reduce the headline rate of corporation tax and in particular plans to lower the small companies rate of corporation tax to 20%.”