Menu costs

Geoff Riley highlighted the 'menu costs' associated with the cut in VAT. (Link) The FT carries a similar article where retailers, whilst broadly welcoming the chancellor's cut in the rate of value added tax, warned that the reduction was difficult to implement and would be eclipsed by clearance sales in the next few weeks. With many retailers already cutting prices by about 20 per cent to stimulate spending in the run-up to Christmas, the cut from 17.5 per cent to 15 per cent in the rate of VAT comes into force on December 1 and lasts until the end of next year. As retailers privately warned of a "logistical nightmare" in adjusting prices, the pre-Budget report acknowledged that overall prices would be "reduced progressively rather than immediately". The difficulty of physically changing the price of thousands of product lines at the busiest period of the retail year will be a substantial challenge for those retailers that choose to move on December 1. (Link)