Belfast Telegraph

Bah humbug! Christmas wasn't jolly good at all

Austerity was a buzzword of 2010 - and public sector cuts and a VAT rise will ensure it continues as a consumer trend in 2011. Yet if the twin spectres of a VAT increase and bad weather do their worst, retailers themselves may be forced to adopt some austerity measures of their own.

With the sector employing between 60,000 and 90,000 people in Northern Ireland, it is hoped retailers, particularly independents, will not be forced to make job cuts or reduce staff hours to make ends meet.

Glyn Roberts, chief executive of the Northern Ireland Independent Retail Association, said the increase would be a considerable drag on the economy as a whole, and not just retail.

"At this point, given that the whole focus should be on trying to get people spending, hiking up VAT is the wrong thing to do. I am very concerned about a number of retailers who may not survive," he said.

Evidence suggests that retailers cannot afford to absorb the costs of the increase from 17.5% to 20% by themselves.

Inevitably, the customer is going to have to put their hands even deeper into their pockets to make up the 2.5% jump, creating the danger that some may simply opt not to spend at all.

And while the thaw has led to a boom in bottled water sales, the post-Christmas period has gotten off to a bad start for those who had to close their premises due to burst pipes.

The British Retail Consortium has carried out a survey, which found that nearly three quarters of major retailers are planning to raise the price of goods in shops because of VAT. Just 13% said prices would remain the same, while the same percentage said they would fall.

Retailers are also facing increasing raw material costs and utility bills.

Just over 80% told the BRC that their biggest headache in the year to come was weak consumer demand, while 76% furrowed their brows over inflationary pressures.

And despite the overall gloom, the BRC's survey of 17 major retailers, which account for half of UK retail turnover, suggested they would increase spending on their businesses. Nearly 50% said they would increase staff, and 40% said they would increase spending.

Let's hope increased spending on retail business is one trend we also experience here.

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