The Chancellor has failed to set the High Street alight with Christmas shoppers with his derisory 2.5% cut in VAT. Most people feel that the savings are too small to be significant enough to tempt them back to the shops.
Those who do believe it will save them money are unlikely to be seen until the VAT reduction comes into affect on 1 December. This however looks too late for both Woolworths and MFI both of whom look as though they are going into administration. These could be the first of several big names shops to bite the dust as the credit crunch continues to push the UK into a recession.
Wednesday, November 26, 2008
Sunday, November 23, 2008
Vats what I think
In a week where Lloyds TSB shareholders voted to buy HBOS and where Royal Bank of Scotland agreed to guarantee business overdraft rates you would think that the governments problems with they economy were starting to clear.
However, the acquisition sorry I mean merger of Lloyds TSB and HBOS is likely to result in around 20,000 staff joining the ranks of unemployed which is growing day by day as one after another business reviews their future forecasts and decides they need to save money by reducing the size of their workforces. The experts have also predicted that there could be around 3 million unemployed people in the UK by 2010 which is a gloomy prediction indeed.
The government are therefore desperate to avoid any sort of a prolonged recession and with that in mind it is likely that they will cut VAT from 17.5% to 15% as a temporary measure tomorrow in an effort to encourage people to spend their money. This would make sense if the shops all passed on the VAT cut without increasing their prices but I fear that many shops will reduce the VAT and simply increase their prices before VAT so that only part of the benefits are passed on to the consumer with the shops taking an increase in profits instead.
If this happens and people do no see any immediate benefit they will save rather than spend their money which will lead to shops selling less and therefore cutting staff numbers further to cut costs leading to more unemployed people who in turn will spend less and the shops will receive less money and a vicious circle will then transpire.
Hopefully this will not be the case and the imminent downturn will be short and swift but I have my doubts.
However, the acquisition sorry I mean merger of Lloyds TSB and HBOS is likely to result in around 20,000 staff joining the ranks of unemployed which is growing day by day as one after another business reviews their future forecasts and decides they need to save money by reducing the size of their workforces. The experts have also predicted that there could be around 3 million unemployed people in the UK by 2010 which is a gloomy prediction indeed.
The government are therefore desperate to avoid any sort of a prolonged recession and with that in mind it is likely that they will cut VAT from 17.5% to 15% as a temporary measure tomorrow in an effort to encourage people to spend their money. This would make sense if the shops all passed on the VAT cut without increasing their prices but I fear that many shops will reduce the VAT and simply increase their prices before VAT so that only part of the benefits are passed on to the consumer with the shops taking an increase in profits instead.
If this happens and people do no see any immediate benefit they will save rather than spend their money which will lead to shops selling less and therefore cutting staff numbers further to cut costs leading to more unemployed people who in turn will spend less and the shops will receive less money and a vicious circle will then transpire.
Hopefully this will not be the case and the imminent downturn will be short and swift but I have my doubts.
Wednesday, November 12, 2008
Mortgage interest rates
Whilst the Bank of England slashed interest rates by a massive 1.5% to 3% last week many of the major banks and building societies have still to confirm if they will heed Gordon Brown's pleas and pass on this rate cut in full.
Some such as HBOS, Lloyds TSB, Abbey, Nationwide and Bradford & Bingley have announced that they will pass the rate cut on in full whilst others such as the Alliance & Leicester are still undecided about how much of a reduction to pass on to their mortgage borrowers.
Most people with tracker mortgages should have received an immediate reduction in their rates but as the rates have become lower some mortgage lenders are starting to point out that they have collars on the rates. Lenders who have collars in their tracker mortgages include Halifax, Nationwide and the Yorkshire Building Society.
These collars effectively dictate that the lender does not have to pass on the full rate cut if it will take the rate below say 3%. The wording has always been there but was never important before as rates were never as low as they are right now. They will become more important in future if the Bank of England reduces rates in future as it is widely expected to do.
If you have a fixed rate mortgage then unfortunately there is no immediate benefit to you but if your tie in period finishes soon this could lead to you being able to save money by moving onto a lower rate.
Some such as HBOS, Lloyds TSB, Abbey, Nationwide and Bradford & Bingley have announced that they will pass the rate cut on in full whilst others such as the Alliance & Leicester are still undecided about how much of a reduction to pass on to their mortgage borrowers.
Most people with tracker mortgages should have received an immediate reduction in their rates but as the rates have become lower some mortgage lenders are starting to point out that they have collars on the rates. Lenders who have collars in their tracker mortgages include Halifax, Nationwide and the Yorkshire Building Society.
These collars effectively dictate that the lender does not have to pass on the full rate cut if it will take the rate below say 3%. The wording has always been there but was never important before as rates were never as low as they are right now. They will become more important in future if the Bank of England reduces rates in future as it is widely expected to do.
If you have a fixed rate mortgage then unfortunately there is no immediate benefit to you but if your tie in period finishes soon this could lead to you being able to save money by moving onto a lower rate.
Subscribe to:
Posts (Atom)
