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January 3, 2011    

Retail sales to slump following VAT hike

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by Kay Murchie

According to experts, the forthcoming VAT hike will have resulted in the purchase of big-ticket items - boosting retail sales in December and the first few days of January.

However, the VAT rise from 17.5% to 20%, which kicks in tomorrow, is expected to mean consumers will cut back on their spending over the coming months.

According to a report by the Centre for Retail Research and Kelkoo, the online shopping group, retail sales will slump by more than £2 billion in the first quarter of 2011 because of the VAT hike.

The report is forecasting that consumers will spend £22.5 billion in the January sales - a rise of £360 million compared with a year ago.

However, consumers will spend an average of £324 less this year as a result of the rise in the levy.

Commenting on the VAT rise, Richard Lim of the British Retail Consortium (BRC) said the retail sector will be hit but it is necessary “as part of the Government’s package to tackle the deficit.”

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