...and indeed he has done, by 2.5%. I wonder how retailers will react to this. If they just cut their prices by 2.5%, we'd end up with lots of funny prices like £10.42 instead of £10.99. So the question is, will they round up or round down?
I'm wondering that myself. I think there have been so many price cuts in the retail trade recently I'm not sure what we'll see the VAT effect on. Food doesn't carry VAT anyway.
There is no guarantee that the VAT savings will be passed on to consumers. A friend of mine told me that in Portugal the government abolished VAT on gym membership and most didn't pass on the saving.
Some firms are getting in early and reducing their prices now - my partner received an email this morning from an online retailer he's used before, advertising that they are implementing a 2.5% price cut from today rather than waiting till Monday. It's not worth much, but I think retailers are just desperate to do whatever they can to get people buying.
I have been receiving mails from IT companies to see if any extra IT resource is required to make the changes. They are trying to make out it is the next Y2K.
I think retailers are worried that people won't spend this weekend waiting for the decreases - a taste of what deflation would be like. I know boots are offering extra advantage points this weekend probably to offset this effect.
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