Member Article

SMEs preparing to take a hit on profits despite strongest quarter for over three years

WITH the Government’s deficit-busting 2.5% VAT hike now imminent, worries about consumer demand will force many SMEs to absorb the cost of the rise and take a hit on their profits.

The finding comes despite new figures showing that online SMEs have experienced the strongest quarter in over three years, with sales up 20% compared to the same period in 2009.

eBay’s Online Business Index, a regular barometer of the attitudes and performance of more than 600 VAT-registered business, found that nearly a quarter (24%) of online businesses will absorb the whole cost of the VAT hike to avoid stunting consumer demand, while a further 39% will avoid passing on the whole cost.

Only a quarter (23%) intend to pass on the full cost of the rise to their customers.

Jody Ford, eBay UK’s Director of SME Businesses, said: “Our latest figures reveal that online businesses are continuing to thrive.

“However, the VAT rise is set to hit at the busiest time of year for our businesses, with January on average 10% busier for online firms than a typical month.

“Every business owner, including the 160,000 who make their living on our site, face a difficult dilemma over whether to pass on the imminent VAT rise to their customers.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .