It is now 11th February, five weeks after the UK Government imposed a new VAT rate of 20%. The 20% rate should have led to an increase in retail prices of 2.13%. However, competition in the bed retail market has meant that many retailers have held their prices at pre-increase prices. As an example, the Oakrest guest bed shown below is still being sold at £379.99. If the VAT increase had been passed on, the bed should be priced at £388.07.
Two questions arise from pre-increase bed prices being held. How long will this last? Secondly, who absorbs the margin implications? My bed brands may have the strength to ignore the implications of prices crossing key price points. But in many cases it may be the bed retailer that has the negotiating leverage.
