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Retail will feel every jolt on the road to recovery

Alan Hawkins

So, now at least we know the colour(s) of the new Government’s ties. We also know a bit more about which of the two parties’ favourite plans are likely to end up in the policy pattern.

So, now at least we know the colour(s) of the new Government’s ties. We also know a bit more about which of the two parties’ favourite plans are likely to end up in the policy pattern.

As we thought, the new Government will present the third Budget of 2010 (after the pre-Budget statement and Alistair Darling’s Budget) on June 22.

We are not alone in expecting VAT to rise. A BBC phone-around found commentators who expect a jump outnumber those who don’t by six to one. Most of them, like us, expect the new rate to be 20%. A more worrying prospect for retail than a straight rise is that some zero-rated goods might find themselves brought into the scope for that higher rate.

While details of how the personal allowance hike to £10,000 are yet to be revealed in the Budget, there is going to be a very, very big tax bill to pay somewhere else.

As they have dropped the scheduled 1% rise in National Insurance contributions, which will be very welcome news to business, then the extra cash isn’t going to come from there.

But the big cuts will come in the public spending round. £6bn is a lot to cut, even if it is necessary, and the Tories were quite open before the election that large numbers of public sector employees would find themselves among the unemployment statistics.

So the question is this: will the slightly better than expected economic growth figures sustain the fragile recovery against the hit to consumer expenditure and confidence of rising unemployment? Retail, as ever, will remain exquisitely sensitive to both the chill winds and the warm breezes of the economic environment.

Alan Hawkins is chief executive of independent retail trade body the BHF-BSSA Group

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