VAT and tax rises 'will be good for business'

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VAT and tax rises 'will be good for business'

Tue 13th Oct 2009

UK consumers will begin to feel the after-effects of the recession next year as VAT returns to 17.5 per cent and income tax increases are introduced, according to one industry expert.

While these measures will not initially be good news for consumers, according to James Macpherson from BlackRock, he explains that they will boost consumer-facing businesses cross the country.

Mr Macpherson, head of UK equities and manager of the BGF UK fund, said: "Many consumer-exposed sectors actually performed well through the recession of 2008-09 since they were suffering before the storm hit."

He continued that companies dealing directly with UK consumers could "expect headwinds" in 2010 as a result of the changes to tax.

In general economic terms, Mr Macpherson said that low interest rates are likely to remain as governments around the world are wary of inducing a "double dip recession" by raising rates too quickly.

The Bank of England's Monetary Policy Committee is due to take its next decision on whether to raise, lower or maintain the base rate at its current level of 0.5 per cent next month.

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