The government’s 2.5% reduction to VAT, introduced this time last year to help reduce the slide into recession, comes to an end on January 1st with VAT returning to 17.5%.

What a ridiculous time to reintroduce the VAT hike. I am sure that shops and retailers will really appreciate the extra work over Christmas and the New Year revaluing all their stock to include the additional 2.5%.

The VAT reduction was brought in to reduce the cost of items and encourage consumer spending. I am sure there has been some marginal upturn in sales from it, but from discussions I’ve had with retailers, many have seen it as too little an incentive for shoppers and too widespread a change for retailers to gain any true advantage from it. Stores selling a limited stock might not have found the forced the price reduction difficult to implement but for stores selling limitless varieties of goods, this price change has been an incredibly time consuming change to make.

As the UK lags behind the rest of the world with emergence from recession and with the economy far from out of the woods, there are many, myself included, who feel that the VAT rise might be too hasty a return to the old days, particularly when prospects are still bleak and quick recovery far from certain. From my vantage point, I don’t see confidence and cash returning to the market until September 2010. Perhaps then the VAT figure should have been increased?

Happy New Year!