Small businesses to suffer with VAT rise
The VAT rise will have a negative impact on small businesses. That's according to the Federation of Small Businesses (FSB), which has published a survey revealing 71 per cent of 1,600 respondents expect the rise to be unbeneficial to their businesses. Gordon Millward, regional chairman of the FSB, says the VAT hike will hit company turnovers.
The government rose VAT from 17.5 per cent to 20 per cent yesterday (4 January).
An FSB ‘Voice of Small Business’ panel survey has reported that just under three-quarters (71 per cent) expect the rise to be unbeneficial to their business.
A further 52 per cent expect to increase prices, 45 per cent expect a fall in turnover, and 36 per cent expect a loss of customers as a result.
The FSB is urging the Chancellor to review the increase when the deficit has been significantly reduced and return it to 17.5 per cent. It has also been calling on the government to help "alleviate the stresses and strains on hard hit firms’ cash-flow" by increasing the threshold at which they begin to pay VAT, from the current rate of £70,000 to £90,000.
It says this has the potential to create up to 35,000 jobs.
Millward said: "Small businesses have had a tough time in 2010, especially towards the end of the year, when what should have been a very busy time as people make purchases before the VAT increase, but the busy Christmas period was hampered by heavy snowfall and severe weather.
"These figures show that almost half of respondents are going to have to increase prices as a result and 45 per cent think it’s going to decrease their turnover – neither of which will help small firms take on more staff.
"If the government truly believes that the private sector is going to strengthen the recovery we need to see action. Increasing the threshold at which companies have to register for VAT will put almost £900m back in the pockets of small businesses. Without this small firms will struggle to bounce back as the spending cuts start to bite."
