81 per cent of UK retailers believed the coalition government would increase VAT in the budget announcement, despite assurances in both Conservative and Liberal Democrat manifestos that VAT would remain at 17.5 per cent.

In light of this, seven per cent of retailers claim they will make redundancies to compensate for the price rise.

In the OnePoll survey of 675 retail decision makers, commissioned by more2, only 11 per cent thought that VAT would remain at its current level, while seven per cent had reserved judgement.

Over two thirds of retailers (68 per cent) are planning on passing the potential increase on to their customers. One in 10 is claiming that if a rise occurs they will absorb the price increase.

The increase spells bad news for consumers in London, South West and East Midlands as 87 per cent, 59 per cent and 57 per cent of retailers in these areas are respectively planning on increasing sales prices to counteract the added VAT. However, shoppers in East Anglia will fare significantly better as almost half (43 per cent) of retailers say they will keep their prices the same. Welsh (32 per cent) and Scottish (26 per cent) retailers are also keen to protect the consumer by absorbing the rise themselves.

Comments Kevin McSpadden, MD, more2: “With so many UK retailers already formulating how they will respond to the potential rise in VAT, it’s worrying that 21 per cent of retailers have still not yet decided on their course of action, should the VAT rise come into force. While extra financial pressures of a VAT rise will impact the retail sector, the key is to look at more efficient use of marketing budgets to communicate the messages to consumers that are vital in a time of change.”