Retailers must brace themselves for a further VAT increase within the next year, Aurora Fashions non-executive president Stuart Binnie warned at Drapers’ sistle title Retail Week’a annual conference today.
Binnie, who is president of the group which includes chains such as Warehouse, Oasis and Karen Millen, said whichever political party comes to power at the next election will look to “reduce consumer expenditure in favour of investment and exports”, in a bid to tackle the public sector deficit.
“There is no better way to do that than increasing VAT and I would certainly forecast at increase in VAT in the next 12 months,” he said.
Binnie added that the retail sector faces yet more tough trading despite improvements in the UK economy.
Referencing BRC-KPMG Retail Sales Monitor figures, Binnie said: “2009 turned out to be rather better than anticipated, only to be followed by January [when like-for-like sales fell 0.7%]. The obvious reason was the weather and the VAT increase. I certainly don’t see further sales declines in principle but nor can I get excited about increases.”
However Binnie also stressed the positives, including the many opportunities available to retailers such as international expansion and multichannel retailing.
“We can address these with some optimism against a background that is clearly unhelpful.” he said. “There is always a recovery but the timing and extent is uncertain at the moment.”