Survey reveals VAT hike will hurt SMEs

| January 24, 2011 | 0 Comments

A survey by Aldermore, the banking group, has revealed the recent VAT hike will hurt small and medium sized enterprises (SMEs).

According to the survey, around 35% of Britain’s SMEs said the new rate, from 17.5% to 20%, will put a strain on their cash flow and they will need extra funding to cope with the rise.

Aldermore chief executive Philip Monks comments: “The VAT rise will only add to the financial squeeze faced by many SMEs.

“With many of the big banks still reluctant to extend credit, the VAT rise could strain working capital to breaking point,” he added.

The rise in the VAT has been deemed necessary by the Coalition Government to control the spiralling budget deficit.

However, the rise has already hit retail sales after the John Lewis Partnership, which is regarded as a barometer of British retailing, last week revealed sales slowed in the week to 15 January.

In the previous week, the renowned employee-owned department store said the bank holiday, on Monday 3 January, saw shoppers buy furniture and electrical goods as they looked to beat the VAT rise and department store sales soared 38.7% – the biggest rise in the group’s fiscal year which ends this month.

However, last week, sales slowed to 4.1% to £55.8 million as households look to rein in their spending as the VAT rise takes hold, and food and fuel prices rise.

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