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Retail’s reasons to be cheerful about Budget

Alan Hawkins

Asked his reaction to the third Budget of 2010 (pre-Budget statement, Darling Budget, Osborne Budget), one of our members said he was pleased that the uncertainty, which he felt had depressed sales in the previous three months, had been resolved. It has been resolved in that the Chancellor has made it clear we are all going to be a lot poorer, but at least it has been resolved.

Asked his reaction to the third Budget of 2010 (pre-Budget statement, Darling Budget, Osborne Budget), one of our members said he was pleased that the uncertainty, which he felt had depressed sales in the previous three months, had been resolved. It has been resolved in that the Chancellor has made it clear we are all going to be a lot poorer, but at least it has been resolved.

He can come across as optimistic, this retailer, taking the view that not only is the glass half full but that the waiter will be around any time now to top it up. To his mind the VAT increase to 20% will depress sales and rack up inflation, but in the meantime consumers will be open to “beat the increase” offers, particularly on big-ticket items. There is good evidence for this, as it happened last December.

Others are relieved VAT is “only” rising to 20% and that the evil day has been deferred to January 4.

It was fairly obvious that the rise would happen then because it is exactly then that the 2010 increase to 17.5% will drop out of the year-on-year statistics, so the inflationary jump will be minimised.

However, there are reasons to expect inflation to burgeon in 2011 and VAT is just a small one. Through the supply chain we hear of Far Eastern price rises in commodities and finished goods, magnified by exchange rate changes. A new generation of retailers might learn the old skills of pricing in an inflationary market.

The Budget will hit employment, the public sector spending round will slash Government spending and inflation will rise. Retail had better hope that the Chancellor’s plan keeps the bond markets happy; if interest rates take off again then consumers will be hit from all sides at once, but I’m sure our retailer has a positive take on that - retailers do.

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