Craft bakers hold off on passing on VAT increase

18 January, 2011
Page 10 

Craft bakers are waiting until spring to put up prices, fearing a VAT rise could jeopardise trade during the toughest time of the year. Although many don't sell that many VAT-rated products, such as hot takeaway food, the hike to 20% would compound a patchy Christmas nationwide.

Chatwins won't put prices up in its coffee lounges until Easter, said chairman Edward Chatwin: "January wouldn't be the best time to do it so we'll lose that margin for the next few months."

And Price & Sons in Ludlow plans to wait until its annual price rise when ingredient costs go up.

Eat-in food in Scottish bakery Ashers' cafés as well as some takeaway products in its retail shops will be affected, said MD Alister Asher: "January and February are usually quieter, so we plan to hold prices for a couple of months and will move them when things pick up in March."

Paul Clark, of Phat Pasty, said the VAT increase was hitting it hard as the firm sells lots of hot products such as soup, bacon rolls and breakfast products. "We haven't passed those price increases onto our customers yet. Obviously it will impact on margin but we're currently absorbing those costs into the business," said Clark.

More than 70% of small firms expect the VAT rise to have a negative impact on their business, according to a member survey by the Federation of Small Businesses. However, small bakery outfits such as kitchen table cupcake makers might be able to escape the increase, because self-employed people with a turnover excluding VAT under £150,000 can register for a flat-rate scheme with HM Revenue & Customs and pay a fixed rate of tax which is considerably lower than the standard 20%.





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