KPMG: Most Retailers Will Push Prices Beyond VAT Increase

Lucas Gilmore, “Big 4″ observer
January 03, 2011 /

The latest research conducted by KPMG revealed that 60 percent of retailers would implement price increase following the 2.5 percent rise in VAT from 17.5 percent to 20 percent, a move by the Coalition government in an effort to fend off deficits.

Among the companies expected to increase prices of their products and services include fitness centers, mobile phone firms, and restaurants. Price increase might play between 5 percent to 8 percent or more than these figures, experts said.

KPMG partner Martin Scott said these companies are left with no other option but to pass on the burden of VAT hike to customers through price increase since they have been giving them discounts for 18 months now, adding that he would be surprised if “we didn’t see the majority increase prices by far more than the VAT jump.” He said these companies could no longer sustain these low prices.

The rise in VAT would subsequently add £400 to the annual financial burden of an average family and would pose a threat to about 250,000 jobs, Labor chief Ed Miliband said.

Telecommunications companies have already warned their clients that rates for their short message service (SMS) on 02 network would see a price increase of 20 percent, from 10 to 12 percent, while 10 percent for that in T-Mobile, from 10 percent to 11 percent.

Appliances and cars would also bit hit by the rise in VAT. Every price increase is expected to jump by 2.10 percent for every item like car, television, mobile phones, and apparel, among others.

The National Statistics office noted that some companies have already implemented price increase even before the end of 2010.

 

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