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VAT increase disguises extra price hikes

Retailers to bump up prices this January

January shopping

UK businesses plan to use January’s VAT rise to hide new pricing strategies, according to research from consultancy KPMG.

The report reveals that shops and manufacturers are the most likely businesses to bump up their prices. This may go unnoticed amid pricing confusion caused by a hike in VAT.

During the pricing mayhem of the January sales, we’re scouring the high street for genuine deals and discounts on everything from baby products to kitchen appliances. Keep updated with our guide to high street shop deals.

Check your bill

Which? shopping expert Sarah Dennis says: ‘To add to pricing confusion following the VAT hike, shops also have until 1 February 2011 to adjust their prices on the shelf.

‘This means that the price displayed on the tag may not be what you’re asked to pay at the till. Try to have an idea of what you expect to pay – and don’t be afraid to double check that the price is correct.’

If you’re worried about getting caught out at the till, shopping online gives you more time and space to check what you’re buying. Have a look at our online shopping guide for your rights when you shop online.

Prices may rise by 5-8%

According to KPMG, 60% of retailers and consumer goods manufacturers intend to raise their prices by more than the 2.5% VAT increase that came into force at midnight last night.

Across all industries researched – including financial services and utilities – 40% intended to do the same with their prices. Analysts predict that shops will make the most of the VAT increase and use the confusion to raise their prices by between 5% and 8%.

Clothes and food hikes

The latest figures from the Office of National Statistics show that, even before the higher VAT rate came into force, there were several record price rises in the lead up to 2011.

Between October and November 2010, the price of food and non-alcoholic drinks experienced the largest rise of any October to November on record. The price of fruit alone went up by 7.5%. Another record rise came in the clothing and footwear sectors.

How much will the VAT rise cost you?

Tell us if you’re concerned about the VAT hike on Which? Conversation.

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