Shoppers cash in on discounts
High Street retailers enjoyed a pick-up in business in July as consumers loosened their purse strings, official figures have revealed.
Retail sales rose 0.4% in July, taking the annual gain to 3.3% - its highest point since May 2008, the Office for National Statistics says.
This follows on from an exceptionally strong June when sales soared by an upwardly revised 1.3%.
The higher-than-expected gain was boosted by higher spending on furniture and electrical goods. Sales from household goods stores lifted 4.5% on the month - the highest since August 2006.
However, sales of clothing and footwear were down 0.4% on June but still stood 10.3% higher than July 2008. Food sales were also on a downhill slope in July.
Economists have been attributing much of the recent sales rises to early summer discounting.
Vicky Redwood, UK economist at Capital Economics, says: “The retail sector clearly has built up a decent amount of positive momentum, which could well last a few months more. But we remain pretty gloomy about the outlook for sales further ahead – not least because of the looming tax rises on the horizon.”
The rate of VAT is due to return to 17.5% after a temporary period at just 15%.
The latest high street figures mirror those released by the British Retail Consortium earlier this month. Like-for-like sales, which discounts the impact of new store openings, increased by 1.8% last month compared with July 2008.
Invented by a Frenchman in 1954 and ironically introduced in the UK on 1 April 1973, VAT is an indirect tax levied on the value added in the production of goods and services, from primary production to final consumption and is paid by the buyer. Its levying is complex, with a number of exemptions and exclusions. For example, in the UK, VAT is payable on chocolate-covered biscuits, but not on chocolate-covered cakes and the non-VAT status of McVitie’s Jaffa Cakes was challenged in a UK court case to determine whether Jaffa Cake was a cake or a biscuit. The judge ruled that the Jaffa Cake is a cake, McVitie’s won the case and VAT is not paid on Jaffa Cakes in the UK.