Big-ticket retailers plan to turn timing of the VAT increase to their advantage

Aamir Ahmad, managing director at mid-market furniture chain Dwell, said he was considering absorbing the increase and keeping prices flat. Ahmad said Dwell would then promote its flat prices to shoppers. He said: “Value is a really big thing at the moment. We’re trying to re-engineer our pricing structure in terms of buying. We’re growing so we’re hoping to be able to give better volumes to our suppliers. The VAT rise is not a major thing for our customers but it is important to send a message that we’re good value.”

Paul McGowan, chief executive of Hilco, whose investment firm Valco Capital owns Habitat and Allied Carpets, said: “Everyone is expecting a rush pre the rise, which will be led by promotional activity. But everyone will have to work harder as a result next year.”

Homebase sent out emails to customers - two days after the VAT rise from 17.5% to 20% was revealed in the Budget last Tuesday - with the slogan ‘Beat the VAT increase!’ in the subject line.

Although sent in error, the email could be a sign of things to come from the retailer, which said it will be “examining and developing” its promotional activity in the run up to the VAT rise.

The tagline ‘Beat the Vat increase’ was used by Dreams in its marketing last year before VAT was reinstated from 15% to 17.5%. The beds specialist said it had not made a decision on whether to do the same this year.