Growers warn garden retailers they cannot absorb VAT increase

The VAT increase topped exhibitors' budgetary concerns at the National Plant Show in Warwickshire last week, where growers warned that they had no margin to absorb the impact on retailers' behalf.

Chancellor George Osborne's decision to increase VAT from 17.5 to 20 per cent sparked fears among suppliers that major retailers would pass the cost down the supply chain out of reluctance to break with key price points.

Former Homebase buyer and Greenline Plants owner Matt Graham said: "I'd like to think it won't have too much of a detrimental effect, but I imagine that the DIY sheds are putting the squeeze on a lot tighter than they would ordinarily because there are fixed prices and big retailers are not going to want to squeeze their margins."

Farplants sales and marketing director Nick Richards said the recession had not adversely affected the "lower end" of the plant market but added: "We are moving into new territory with this VAT increase, so we are going to be squeezed by retailers who don't want to put their prices up."

Wyevale sales director Doug Reade said retailers may want to squeeze growers but there was no margin left to do so. "We can't reduce prices - because that is what it would mean effectively. We just have to look much more closely at the price points they use.

"If you look at the HTA's perceived value of plants research, a lot of people said they would be prepared to pay more, so it should be an opportunity to be taken to move plants up a price point."

Seiont Nursery director Neil Alcock agreed: "We are on bare-bones pricing already so we can't absorb the costs as we have done in the past few years."

Forest Edge owner David Edge added: "I don't think retailers will ask us to squeeze our margins. It will just have to be one of those things that retailers accept and the price point will have to change."

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