The impact of the VAT cut on the channel is not likely to beanything major with expectations in the industry that the small drop in priceswill make little difference.
One of the main planks of the pre-budget report was theplanned drop from Monday in VAT from 17.5% to 15% in an attempt to spur salesin the high-street.
But some in the channel have expressed doubts that the VATcut will have an impact on the prices passed onto customers.
“The market is driven by price points and I fail to see howa £99 price point moving to £96.50 will stimulate sales in our sector. All theVAT cut will do is give everyone involved in the channel a short-term headacheas they struggle to implement it across their IT and accounts systems,” saidPhil Jones, sales and marketing director at Brother UK.
““We can’t assume that the VAT cut will be passed on becausemargins are under pressure from other factors such as the devaluation ofsterling, which is ramping up import cost prices," he added.
"So I wouldn’t be surprised ifdistributors and resellers opt for a simpler approach and maintain price pointsduring the temporary VAT cut and pocket the 2.5% to give them a little bitextra headroom,” Jones said.
The problems in the retail sector mean that the VAT cut isunlikely to be passed on said Clive Longbottom, service director for businessprocesses facilitation at Quocirca, said that the high-street was alreadydiscoujnting heaviliy.
“If you are buying a laptop then a 2.5% decrease doesn’tmake a great deal of difference if it is passed on, which it is not likely tobe,” he said.
He added that for most players in the market the cut wouldjust create headaches as prices had to be changed across the board.
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