HAULAGE contractors in the Borders could face serious cash flow problems as a result of the VAT increase – from 17.5 to 20 per cent – imposed on Tuesday.
That is the grim prediction from James Hislop who runs 10 articulated lorries from his depot in Roxburgh near Kelso.
Mr Hislop revealed that, combined with recent oil company price hikes and the fuel duty increase of January 1, he was now paying 6p more for a litre of diesel than he was two weeks ago.
And with his fleet using 10,000 litres in a working week, his company, founded 23 years ago, is having to fork out an extra £600.
“Of course the VAT element can be claimed back, but this is done quarterly and won’t happen for three months,” said Mr Hislop who employs 11 full-time staff.
“Our company is doing relatively well with contracts for hauling horse bedding and animal feeds to East Anglia and to most of the south of England, but even we must pass on the extra costs to our customers. No business can simply sustain a rise of £120 per working day.
“Fuel, like VAT, affects everything and everyone, and this will certainly cause cash flow problems for many transport companies and put yet more pressure on consumers who cannot claim the tax back.
“My fear for the Borders economy is that, just when it needs stimulating, it is being suppressed. For virtually everyone living in this region, the car is a necessity, not a luxury, and if they are paying extra at the pumps, they are spending less on other things. It is a recipe, in my view, for a depression.
“The fact that banks are reluctant to lend while still paying out bonuses to their executives and that oil companies bump up prices even when making massive profits makes it all the more difficult to accept.
“As a businessman, rather than a politician, I believe VAT should have been cut to 10 per cent to produce a more dynamic economy better placed to tackle the national deficit.”
It was a sentiment shared by pub owner Scott Paterson, whose customers can expect the price of a pint of lager and special to rise by 10p to £2.80 by the middle of this month at his two Galashiels outlets: the Auld Mill and the Ladhope. Guinness and real ale will go up 15p to £2.95.
“The rises are totally unavoidable and include both the VAT and a price increase from the brewery,” said Mr Paterson. “I am trying to hold off for as long as possible because money is so tight for our customers, so the rises will not take effect until mid-January.
“The period after the New Year is traditionally difficult for the pub trade in the Borders, but this will make matters even worse. We are lucky to have some pre-booked Burns suppers and birthday parties, but the punters can only spend so much and they are being really squeezed with the VAT rise.
“This will widen the gap between what pubs charge and the deals on offer in supermarkets which are better able to absorb tax rises and remain our biggest threat.
“It sometimes feels we are fighting a losing battle because we cannot do drink promotions, while supermarkets can make crazy offers.”
Mr Paterson revealed he has recently removed the Sky Sports television service from the Auld Mill after his provider informed him the annual rent, based on the rateable value of the premises, was going up from £10,500 to £13,000.
“I find it much cheaper to offer a free taxi service from one pub to the other [The Ladhope] when a big game is on, but it all adds up to yet more pressure on a trade in which many licensees are already really struggling.”
Asked how his regulars viewed the economic crisis, Mr Paterson told us: “My advice would be don’t mention ‘banks’ or ‘bonuses’ in the same sentence.”