Retailers have protected customers from much of the effect of the recent VAT rise by keeping prices down.

Retailers absorb VAT increase on non-food

Retailers have protected customers from much of the effect of the recent VAT rise by keeping prices down.

Retailers absorb VAT increase on non-food

The British Retail Consortium says that the prices of petrol, other transport costs and insurance have been the main factors driving overall inflation. The rise in VAT to its normal rate of 17.5% has contributed but, states the BRC, the effect on shop prices has largely been lost in a blizzard of discounts and promotions.

The inflation rate is now at its highest for 14 months. But, says BRC economist Richard Lim: “The prices of non-food goods, the ones generally subject to VAT, have gone up much less than if retailers had just passed all the VAT increase on to customers.

“The official figures show clothing and footwear are 4.5% cheaper than this time last year. Food inflation remains relatively low at 1.4% – around a tenth of what it was last year.

“By contrast petrol prices, other transport costs and insurance are all up by a big margin on the year, driving overall inflation.”

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