Jan 2, 2010
British shoppers hunt Christmas sale bargains before tax rise
Jan 2, 2010
LONDON, Dec 30, 2009 (AFP) - Recession-hit Britons are rushing to snap up bargains in the traditional post-Christmas sales, but economists warn that a looming tax hike is also fuelling demand -- and could stall economic recovery.
Photo : Stefan Wermuth
Many shops in Britain began slashing prices on Saturday 26 December or Boxing Day -- the day after Christmas Day -- in an attempt to shift old stock and lure customers into parting with their hard-earned cash.
As a result, the total number of shoppers soared by almost 18.6 percent on Saturday 26 December, compared with Boxing Day of the previous year, market research firm Experian said.
And on Sunday 27 December, the number of shoppers was 17.9 percent higher than the equivalent day of 2008, as many retailers slashed their prices by between 75 and 90 percent, according to Experian.
"It's been the strongest start to the post Christmas sales we have seen for a number of years -- if not ever," said Richard Dodd, spokesman for the British Retail Consortium, an industry body.
"The big question is, to what extent this momentum continues into the New Year and to what extent it is just an interlude in the gloom."
This year, cash-strapped shoppers are seeking to avoid a large tax rise which kicks in on Friday 1 January.
One year ago, the British government had slashed VAT, or value added tax, to 15.0 percent to help lift the battered economy out of recession and boost consumer spending.
The measure expires on January 1, when the taxation on goods and services will return to the previous level of 17.5 percent.
James Bailey, manager of the Cabot Circus shopping centre in Bristol, southwestern England, said customers were keen to save the extra cash and snap up big-ticket items like jewellery, televisions and video game consoles.
"We are expecting to see a push on the larger-ticket items, like televisions, where the 2.5 percent makes a difference -- that is the feedback we are getting from customers," said Bailey.
Norman Black, marketing director for the Brent Cross shopping centre in north London, agreed that big discounts and the VAT increase had prompted "mission shopping."
"The place is absolutely heaving," Black said of Brent Cross, which contains 125 shops.
He added: "People are mission shopping. People who have clearly had their eye on things they want and have been saving for it all year and have now come to buy it in the sales."
But Jorg Radeke, an economist for the Centre for Economics and Business Research (CEBR), argued that increasing VAT could damage Britain's economic recovery if customers simply cut their spending afterwards.
"The downside of a working VAT cut is that reversing it in January has the potential of stalling an emerging recovery," Radeke said.
"Indeed, when CEBR called for the cut last year we argued that it should stay in place until July 2010 anticipating that domestic demand would be yet too weak to cope with a reversal at the turn of the year."
He added: "Reversing the cut in January is likely to wipe out most of the benefits it was meant to create in the first place -- expect a tough Spring for retailers and other industries dependent on consumer spending."
Britain is the last major world economy still in recession, but the country is widely expected to have returned to growth during the three months to December.by Odile Duperry
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