the Business Forum and
the Economic Partnership
in Brighton & Hove
Homepage    BCRP Intranet    Funding    Events    Knowledgebase    Links    About us     Contact us
Key projects



Workforce development 


Business &

Property &
Development sites




Consultation opportunities

Brighton & Hove Business Forum
8-11 Pavilion Buildings, Brighton, BN1 1EE
Tel: 01273 735442
Email: info@brighton

© Brighton & Hove
Business Forum

News - 28 May 2010
Stephen Robertson, Director General, BRC

BRC fears VAT hike will cost jobs

The British Retail Consortium (BRC) has voiced concerns that raising the VAT rate could have a devastating effect on the retail industry that will impact on the economy. The business group claims that increasing the VAT rate to 20% would cost 163,000 jobs over four years and reduce consumer spending by £3.6 billion over the same period.

The biggest challenge facing the new Government is to reduce the budget deficit without damaging the recovery. Now, for the first time, independent analysis carried out for the British Retail Consortium quantifies the economic impact of a range of possible VAT increases and of the National Insurance increases already announced by the new Government.

The research concludes that there is no silver bullet that will allow the Government to raise large amounts of revenue without having a substantial effect on the economy. Employment, consumption and GDP would all be hit significantly by tax rises.

The BRC is calling on the Government to follow through on its recent statements that public spending cuts will be prioritised over tax rises as a route to tackling the deficit. The BRC is also cautioning that halving the deficit over four years not three would better support the recovery.

In its first year, a VAT rate of 20% would reduce the deficit by £11.3 billion but by the end of that first year there would be 30,000 fewer jobs in the UK – across all employment sectors - than if there had been no increase. After four years that figure would be 163,000 fewer jobs.

A year on from raising VAT to 20%, consumer spending would be £1.6 billion less than it would have been and after four years, £3.6 billion less.

Higher VAT means lower demand for goods and services as prices go up and companies’ margins are hit, meaning they have to cut costs to keep trading so employ fewer people or hold-back on job creation.

The analysis commissioned by the BRC also examines the impact of a range of other possible VAT increases. A 19% VAT rate would cost 99,000 jobs over four years while a 22.5% rate would mean 317,000 fewer jobs over the same period.

The new Government has said it will increase employees’ National Insurance Contributions by 1% and employers’ by 0.5%. That will reduce UK job numbers by 25,000 in the first year. The UK jobs total will be 109,000 down after four years. Consumer spending would contract by £948 million in the first year and £2.2 billion after four years.

British Retail Consortium Director General Stephen Robertson said, “For the first time we have clear, independent evidence showing VAT and NI increases will have a deep and long-lasting impact on jobs and growth.

“The budget deficit is serious. It has to be tackled but proposals must be judged against the implications for jobs and growth revealed by this new information.

“The main tool has to be cutting non-vital public spending. Removing some of the previously-planned National Insurance increase and signals that the Chancellor will look for an 80:20 split between public spending cuts and tax rises are a welcome start.

“Business growth will get the country out of the hole it’s in, led by retail. The Government must now deliver a route to stability that supports companies and customers by avoiding damaging tax rises.”

The study has been carried out for the BRC by the Centre for Economics and Business Research (CEBR) using its model of the UK economy. The model assesses the initial revenue raising impact of the taxes then the follow-on consequences as they cascade through the economy. First round effects can include immediate reductions in spending by those most affected by a tax rise. Second round effects can include firms reducing employment and investment as costs or margins are hit. This feeds through to lower demand and lower productive capacity.

Read related items on:
Retail, pubs, clubs and restaurants
British Retail Consortium
Robertson, Stephen

Browse our business Knowledgebase or search by keyword


9 February 2018
Make Change Count 2018 - helping rough sleepers in Brighton & Hove
8 February 2018
Brighton Technology Company Paxton Announces Recipients of New Scholarship Programmein Association with the University of Brighton 8 February 2018
Cyber London Accelerator Invites Summer 2018 Entries 8 February 2018
Innovate UK Launches Strand 2 Emerging and Enabling Technologies Sector Competition 8 February 2018
Success In Sussex As Food And Drink Heroes Crowned Winners 8 February 2018
UK Games Fund - Fourth Round Open to Applications 8 February 2018
Innovate UK & Prince's Trust Launch Young Innovators' Programme 6 February 2018
Brighton & Hove Food Partnership launches 'Kit Out The Kitchen' crowdfunding campaign 2 February 2018
Brighton & Hove Council and Crest Nicholson win £15m government funding to kickstart King Alfred project 1 February 2018
Could a Utilise Plus Programme grant help you? 1 February 2018
Shoreham Port Facilitates Huge Operation 18 January 2018
IUK Announces Collaborative R&D Funding for Connected and Autonomous Vehicles Simulation 18 January 2018
Renault-Nissan-Mitsubishi Launches $1 Billion Corporate Venture Capital Fund for Next Generation Mobility 17 January 2018
PORTlife #17 Newsletter Out Now 17 January 2018
Over £19,000 raised for Burning the Clocks 2017 11 January 2018
Brighton Main Line Improvement Project: Planned closures in October 2018 and February 2019 11 January 2018
Come on in! Fairtrade Fortnight 2018 8 January 2018
Sussex Business SkillSnap targets hospitality industry skill shortage 3 January 2018
House Price update 2017 Q3 20 December 2017
£14.35 Million European Regional Development Fund Launched 19 December 2017
Leading the way - Sustainability in Action masterclass 15 December 2017
Brighton is among the best places to start a business due to their strong growth factors 15 December 2017
GTR consultation ends 20th Dec 2017 13 December 2017
Ethical Food StartUp Programme - Idea Generation Workshop 12 December 2017
Utilise Plus launch programme of energy efficiency grants and business support for SMEs 11 December 2017
City Centre Vacancy Rates Drop Slightly From Sept 5 December 2017
Innovate UK Announces Sector Competitions in Manufacturing and Infrastructure Systems 5 December 2017
GDPR, steps to early compliance 1 December 2017
The 29th Sussex Business Awards 2017 Winners Announced 1 December 2017
Old tech gear? Give IT a new lease of life 29 November 2017
Driving for Better Business Campaign launches 29 November 2017
ARKA Funerals sponsor Burning the Clocks 2017 with 'In Memory' lanterns 27 November 2017
Govia Thameslink launches third consultation phase on once-in-a-generation timetable restructure 23 November 2017
Coast to Capital Launches Brighton Mainline Alliance 22 November 2017
Calling all UK companies that have transport, parking and commuting issues to address 15 November 2017
Start-up Challenge Business Competition Offering £10,000 Investment to Young Entrepreneurs 15 November 2017
IUK Announces £10 Million Innovation Loans Infrastructure Systems Funding Competition for UK SMEs 15 November 2017
Sussex Food and Drink Grand Finalists Celebrate Success 10 November 2017
Meaning conference confirms speaker line-up: breeding a new army of business activists 10 November 2017
Positive body image documentary screening at Hove school