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Budget relief for indies, but VAT rise causes concern

Independents have welcomed the “small business-friendly” Budget, which contained a raft of beneficial and unexpected measures to support them.

An increase in the National Insurance threshold and a raft of extra allowances have offered indies a surprise boon.

However, indies are also braced for a reduction in margin and logistical issues when the VAT hike to 20% comes into force on January 4.

British Shops and Stores Association (BSSA) deputy managing director Michael Weedon told Drapers that indies would be “pleasantly surprised” by the Budget because there were some measures in there that were unexpected.

He said the rise in the National Insurance (NI) threshold would be “good news” for the indie sector, which employs many part-time staff.

He added: “The £5,000 NI allowance for the first 10 employees is a huge concession for start-ups.”

Nigel Hamilton, president of the Independent Footwear Retailers Association and director of Northern Irish indie Bishops Footwear in Coleraine, said the Government had turned retailers into “a tax collection agency” but echoed the BSSA’s relief at the timing of the VAT rise.

“At least we haven’t made buying commitments [for spring 11],” he said. He added that most indies would “have no choice” but to pass the increase on to the customer.

A number of indies said the VAT increase would affect their buying and sales strategies.

Deryane Tadd, owner of womenswear boutique The Dressing Room in St Albans, said she would not pass price rises on in January but that she would alter her buying strategy for spring 11.

She said: “We will look to do less forward ordering and leave more budget for in-season ordering so we can see what the mood is and react.”

Other stores planned to focus on emerging labels and called on suppliers for more flexible terms.

“My brands have to do a hell of a lot for me now,” said Melanie Trevett, owner of womenswear indie Cristina in Weybridge, Surrey. “They’ve got to give me margin and sell through.”

But other indies shrugged off the VAT rise and were instead focused on the likely impact of unemployment and consumer confidence.

David Weeks, managing director of Edinburgh young fashion indie Xile, said: “VAT going up by 2.5% is not going to be a major factor in whether people buy our clothes. Cuts in the public sector and people losing their jobs are much bigger fears.”

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