Giants vow to absorb VAT rise

BIG stores pledged to absorb or delay yesterday's VAT hike in a bid to tempt customers to keep spending.

Consumers – particularly those looking to buy expensive "big-ticket" items like furniture or cars – rushed to the shops before VAT returned to 17.5 per cent yesterday.

But many of the bigger retailers promised to freeze VAT at the lower rate of 15 per cent on thousands of products, while others will introduce the increase gradually.

Sir Philip Green has said all of his Arcadia Group stores – including Top Shop, Dorothy Perkins and Miss Selfridge – will absorb the increase.

Argos plans to delay any price increases until the end of January, when its new catalogue is published, minimising the costs associated with the change. But its fellow Home Retail Group firm Homebase has said it will raise VAT on all its goods, although it said that because the tax was only one element of pricing, the increase was not likely to be immediately evident.

Tesco pledged to freeze VAT on many non-food items, adding up to a projected 12 million in savings for customers. It is understood the supermarket increased the price of 1,577 items – around 6.3 per cent of its range – last month.

The increases are estimated to include 500 products which are subject to VAT, including bedding, cooking equipment and crockery.

A Tesco spokesman said: "We work hard to keep prices down for customers, which is why we have frozen VAT on thousands of products at the lower rate of 15 per cent. This is on top of 5,000 price cuts over the last two weeks, with average reductions of over 10 per cent."

It is thought Boots has increased the price of over 1,500 product lines by an average of 2 per cent in recent weeks.