How will the VAT rise affect the Workwear industry

We have all known for some time that the new coalition government will be raising the standard rate of VAT from the current 17.5% to 20% as of the 4th January 2011. This will bring the UK in line with other European countries (France 19.6% and Italy 20%).

How this will affect the workwear industry is something that has sparked serious debate amongst manufacturers and suppliers alike.
There are broadly three trains of thought on this matter and three plans of action aimed at adapting business to the forthcoming rate rise.

Many workwear business's aim to swallow the rate rise themselves and maintain current levels of profitability by increasing sales through a variety a marketing and sales campaigns.

Others believe that because the VAT rise will affect all business's nationally, this will therefore have little affect on sales and therefore they will maintain their market position and consequently retain the same or similar levels of profitability.

The third train of thought strikes a note of caution to all business owners, in that should companies not pass on the rate rise to customers by raising prices for fear of offending customers, by in some cases only a few pence, this will create an unsustainable business. The business may well survive for the first year but slowly this policy will mean that the rate rise will continue to chip away at profits and ultimately lead to an unprofitable and unsustainable business.

So which path will JKL Clothing tread. As always we are constantly monitoring the Workwear market place to ensure we remain competitive. We must however ensure that JKL Clothing as a company continue to survive and indeed grow. This may mean that we are forced to pass on the governments decision to raise the rate of VAT to our customers. We have however adopted a fourth strategy prior to having to do this. JKL Clothing have approached all its suppliers and attempted to negotiate a more competitive price from them. We have been able to do this due to the steady growth we have seen during the past 18 months. This has lead to increased spend with our suppliers and therefore a strengthened bargaining position when we come discuss the price we pay for our workwear garments from them.

JKL Clothing will certainly be doing all it can to ensure they are around for many years to come.