The Chancellor’s cut in VAT has had no long term effect on the retail sector, recruiters say.

The Centre for Economics and Business Research (CEBR) has claimed that Alistair Darling’s temporary cut in VAT has succeeded, according to a report by the economics consultancy.

The report compared the trend for retail sales prior to the 2.5 point VAT cut on 1 December with subsequent activity. It also looked at sales pattern growth in the last recession, concluding that there was an immediate boost to sales growth after the cut’s introduction which has been maintained.

But Steve Walters, managing director at Faces Bespoke Retail Recruitment Consultancy, claims that while there may have been some short-term gain, long-term benefits have been negligible.

“The cut has definitely helped cash flow in most business, it has very much been a quick help.

“However over a longer period of time it will start to have no impact as it becomes a way of life.”

Peter Burgess, director at Retail HR, told Recruiter: “Personally I think the cut in VAT was a job-creating exercise.  The idea that the 2.5% cut in VAT has somehow prompted sales, rather than the 50% to 70% discounts offered by the retailers themselves would seem to be daft. 

“I think retailers would have preferred the money to have been spent on business rates and perhaps also employers’ National Insurance contributions.  That way they could employ more staff.”

Sharon Davis, director at Sharon Davis Recruitment, says: “I do not think it has had any impact. None of our clients have mentioned it. I have read that Darling’s idea has kicked in, but I have not had any clients say they have noticed a difference within the retail industry.”