January sales boom but High Street set for a tough year
Britain's shoppers were out in force in the new year with retail sales for January 2.3% higher than a year ago.
Shoppers keen to beat the VAT rise and bag a post-Christmas bargain pushed sales up after a 0.3% decline in December, according to the British Retail Consortium (BRC).
But these results are compared to last year's snowy January when sales were unusually low and experts warn that retailers will face a tough year ahead.
And after the initial push, sales fell back by the end of the month.
DIY and home-related areas saw the biggest gains. Meanwhile, food sales were modest for January and internet sales fell, after a pick-up in November and December, but were still 12.3% higher than a year ago.
Spending levels were hit at the end of January by increasing consumer caution as people began to worry about their financial constraints for 2011.
Stephen Robertson, director general at the BRC, says: "Turning round consumer confidence is central to turning round the economy. A range of pressures is bearing down on customers. As it considers the budget, the government must not add any more."
Experts are gloomy about future predictions and Helen Dickinson, head of retail at KPMG, says: "Falling disposable incomes will continue to exert pressure on sales in the first quarter of the year, traditionally the weakest period of trading as consumers cut back on spending post-Christmas."
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.