3rd December 2008

VAT cut: The Guild of Fine Food comments on the effect on small businesses

Commenting on the 2.5% decrease in VAT introduced this week, Bob Farrand of The Guild of Fine Food maintains that all this will achieve is aggravation for the small business owner.

“While we welcome any attempt to fire up spending when consumers are being cautious, we believe the chancellor has not done enough,” says Farrand. “A 2.5% decrease in VAT on low value items reduces the price to the consumer by just pennies – that does not stimulate spend. A cup of coffee in one of our members’ shops suddenly goes from £1.99 to approximately £1.94. We see it only having an effect on higher value items such as TVs or cars.

“The key point is that the Chancellor has implemented a change – supposedly to improve the economic situation – that will result in considerable additional expenditure for all small businesses. The amount of work, IT changes and time incurred for a small business that is collecting a tax on the part of the Government is significant. In our industry we are having to reprint menus and price lists as well as tackling the back of house changes.”

Farrand concludes: “Legislation to circulate money within local economies would be a far more effective way of generating expenditure and would make a difference nationally.”