VAT hike will fuel demand for sale goods

Published on Monday 27 December 2010 14:03

THE impending VAT increase will encourage record demand for big ticket items such as televisions, computers and white goods in this year's January sales, experts have claimed.

VAT will rise from 17.5 per cent to 20 per cent on 4 January - hiking the price of an item currently on sale at 117.50 to more than 120.

Retailers have the option of waiting until February before passing on the increase on to customers - but analysts believe when the increases take effect, many high street stores will be tempted to round prices up.

Howard Archer, chief UK and European economist at IHS Global Insight, said the increase was expected to lead to a rush to buy large items during the sales.

He said: "The fact that VAT will rise from 17.5 per cent to 20 per cent in early January increases the attractiveness of the sales."

Mr Archer added that fears over the impact of the recession would also lead to more people looking for bargains. "Consumers will be particularly keen to take advantage of genuine bargains," he said. "They will see the sales as a time to make purchases that they could increasingly struggle to make in 2011."