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Jones Lang LaSalle reacts to VAT rise in Emergency Budget

London, 23rd June 2010 – Jones Lang LaSalle’s Head of UK Retail Guy Grainger comments on the implications of the rise in VAT from 17.5% to 20%, effective from January 2011, as announced in today’s emergency budget.
“The decision to increase the standard rate of VAT from 17.5% to 20% brings the UK in line with most other European markets. But it will hit the retail sector hard at a time when the pace of recovery needs all the support it can get. Inevitably, this will affect pricing of goods, but retailers have seen this coming and many will have already factored it into their budgets. Rising operating and supply costs will remain the larger worry and the reality is that these would have had to be absorbed by price rises later in the year in any case.
"This is little comfort for the consumer, but it was always going to be a tough budget. Consumer confidence will inevitably dampen in light of the VAT rise and the cuts that directly impact discretionary spending such as the loss of child tax credits to middle-income earners. This will of course filter through to retail sales, but again it may not be all as bad as it seems as shoppers are already being far more conscientious with their purchases. Consumption patterns are already one of general austerity. It is also encouraging to see that VAT has not been extended to those products currently exempt and the delay in the VAT hike is probably good news for Christmas 2010 as consumers will bring forward their purchases."

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