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Flintshire shops prepare for VAT hike

Shoppers are to see prices increase from January 4 when the VAT rate will go up from 17.5% to 20%. ELEANOR BARLOW spoke to Flintshire businesses about how they thought the changes would affect them

IN JUNE Chancellor George Osborne announced a range of moves to tackle the Government’s financial deficit.

The decision to raise VAT from 17.5% to 20% was among the more controversial measures proposed, and is set to come into effect on Tuesday.

The policy has already prompted criticism from Labour politicians, although Mr Osborne has said it will raise more than £13bn a year.

Martin Jones, owner of menswear shop Vaughan Davies in Mold, said the rise would come at the wrong time for retailers.

He said: “This is only one of a few changes which are worrying for retailers like us.

“The cost of raw material like cotton is going to rise, which will have a major effect on our prices, and transport costs are also going up.

“Although the 2.5% isn’t that much on its own, when it’s added to those it will have a really big impact.”

Mr Jones said sales at the store in December had been ‘excellent’, but admitted he was preparing for a difficult year.

Holywell town centre manager Medwyn Roberts said he thought the rise would have the most impact on shops selling big items.

He said: “In Holywell I don’t think it will have much of an effect on people’s purchasing, because there are no outlets selling large items like fridges or sofas.

“However, most people are on a limited income so they are going to be choosier with what they buy and how much they buy.

“I think any rise in tax, whether it’s VAT or petrol duty, is a concern for everyone.”

But Conservative councillor Matt Wright, Flintshire County Council’s executive member for regeneration, said the tax had to be increased.

“Nobody wants to put up tax but the country is facing an absolutely colossal deficit and if we don’t deal with that now it will be an even bigger problem further down the line,” he said.

“I’m hoping and praying that it is not going to have too much of an effect on businesses in Flintshire.”

Delyn MP David Hanson this week voiced his criticism of the implementation of the hike at what he called ‘the worst possible time’.

“This is bad news for families, right on the back of Christmas,” he said.

“This is the worst possible time for the Tory-led Government to increase VAT. Just as we are seeking to claw our way back to recovery, people in Flintshire will be hit hard.”

He added: “Increasing VAT is wrong for so many reasons. It will hurt motorists as petrol prices and the cost of motoring will rise.

“It will hurt families and pensioners when they go to the shops. And it will hurt small businesses, many of whom will not want to pass on the increase in VAT to their customers.”

Connah’s Quay town centre manager Lisa Fearn said it wasn’t just retailers who would feel the impact of the VAT rise.

She said: “Everyone will suffer as a result of this.

“It’s another measure that’s not really helping town centre businesses. But it’s not just businesses that will be affected, it will be everyone in the community.”

Steven Hughes, owner of Peter Hughes Footwear in Holywell, said he would be taking on the cost of the VAT rise initially.

“The prices won’t be going up straight away,” he said.

“I’ll be paying on the extra cost of the VAT and customers will probably see prices rise gradually over the next year.

“From a small business point of view it is unhelpful, but we have had business rate relief from the Welsh Assembly Government which has been very helpful.

“The rate relief has probably saved me more money than the VAT rise will cost me.”

On the whole, it looks as if retailers are preparing for some tough times ahead of them.

Colin Brew, general manager of the West Cheshire and North Wales Chamber of Commerce, said: “It is clear that 2011 will not be a smooth ride by any means, and retailers in particular will be concerned about the VAT increase to 20% which comes into effect on January 4.

“However, we have an extremely resilient private sector and our region is home to some incredibly innovative and well-run firms.”