The New Year will also usher in a new tax increase as VAT goes up from 17.5 per cent to 20 per cent on January 4. Anna Blackaby finds local retailers and businesses split over how the rise would affect trading.
Nigel Barker, landlord of The Wellington pub, Bennetts Hill, Birmingham: “It sounds a bit cocky but I don’t think it will have much of an effect on us because we are such a specialist pub and people come here specially.
“When we had all the duty increases under the last Government, it didn’t have any detrimental effect on the business.
“I think a lot of pubs will suffer, though. It sounds a bit snobby, but the more downmarket pubs that attract customers that are out of work or on low incomes will suffer more.
“We tend to attract a more affluent clientele and, with another 10p on a pint, they might grumble but it’s not going to stop them enjoying a traditional pint of beer.”
Paul Spencer, partner at Coventry accountancy firm Spencer Gardner Dickins: “The biggest challenge we will face is making sure our systems are able to recognise the new VAT rate in time for the change on January 4.
“Lessons will have been learnt from dealing with the changes in VAT rates in the past few years – however it will still take up a considerable amount of time to get the systems in place.
“The changes involve a complete overhaul of our existing software and our IT department will have to dedicate a significant amount of time into making sure these changes are implemented effectively and efficiently.
“We have also been working hard to get invoices to our clients as soon as possible in order to save them money when possible.
“The biggest challenge for us is implementing these changes during what is already a very busy period for us. However, once we have overcome these initial hurdles, it will be back to business as usual.”
Mark Howard, owner of Disorder Boutique clothing store, Needless Alley, Birmingham: “It’s going to unfairly affect small businesses, particularly a business like ours because at the moment we design and manufacture all our stuff in Birmingham.
“I’m actually in the process of writing to the Prime Minister about it.
“We have made a point of manufacturing in this country and we wanted to put something back into the economy.
“By putting an extra 2.5 per cent tax on us, we have to pay that before we make any profit.
“It makes very little sense for us to continue doing what we are doing in this country.
“We have already got high costs. It’s going to make it even more difficult for us, so I’m quite nervous. It might force us out of the high street.
“What people don’t realise is that the rents and rates are astronomical.
“But we have to be resourceful. We have survived this long because we are, so we will just have to be resourceful about things.”
Anthony Cook, chairman of Birmingham-based online mobile phone retailer Mobile Fun: “In the space of just over 12 months, we are going to experience a VAT hike of five per cent, since the reduction at the end of 2009 when we enjoyed a rate of 15 per cent.
“With a VAT rise scheduled for January 2011, we already have a strategy in place to deal with the rise and the potential knock on effect to our customers.
“VAT is currently 19 per cent on our German website and 19.6 per cent on our recently-launched French website.
“The new UK VAT rate going from 17.5 per cent to 20 per cent in the New Year will decrease exports to EU consumers as the difference in VAT to those in European countries means the UK will lose its current competitive edge, making it less likely that French and German consumers will buy online from UK companies.
“However, as our dedicated European websites are charging local VAT rates, we don’t anticipate a decline in exports to France and Germany following the VAT rise here.
“The changes in VAT rates from 15 per cent, up to 17.5 per cent and now to 20 per cent are more of a headache for us than anything else.
“We welcomed the 15 per cent rate of course, as it made our prices more attractive, but in the long run chopping and changing prices is more of an administrative burden to us.
“We’ll be conducting a price overhaul, with a combination of passing on costs and absorbing them, as otherwise some of our prices will look odd and we need to accommodate the price hikes that we will experience from our suppliers.”
Mike Ferguson, owner of gift store Smithsonia, based in Piccadilly Arcade
“I don’t think it will make much difference because it’s 50p on a £20 sale – it’s neither here nor there.
“It’s the big ticket items that will suffer.
“The perception is that it’s 20 per cent increase, whereas it’s a 2.5 per cent increase, and that gets misrepresented.
“To somebody that’s spending £50, it’s a £1.75 increase and that’s not going to make a big difference.
“Generally speaking, we’ll leave our prices as they are and, as new stuff comes in at new prices, we will price it accordingly.”