Debt problems mount with VAT

People holding off making purchases because they currently suffer from debt problems may want to rethink their strategy, ahead of the VAT rise in January.

Fashion retailer Next has already warned it plans to increase its store prices by eight per cent next year, in line with hikes in global cotton prices.

These look set to take place in March, following a rise in food prices expected for the first quarter of 2011, meaning the simple cost of living could push many to seek debt solutions like a Debt Management Plan (DMP) or an IVA.

Chief executive of Next, Simon Wolfson says the chain is "planning very conservatively for 2011."

Kevin Still, Director of Atlantic Financial Management says: "The VAT hike in the New Year is just one of a number of cumulative household cost increases affecting UK consumers. Each major retailer will look at how it passes some or all of the increases onto consumers. What is clear is that debt problems may become more acute as disposable income gets squeezed further."

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