VAT reversal may push UK back into recession - Leaviss

The upcoming reversal of the UK's emergency VAT cut could spark a collapse in New Year retail sales and ultimately derail the nation's economic recovery, M&G retail fixed income head Jim Leaviss says.

VAT is set to return to 17.5% from 15% in less than a month's time. However, as the move has been pre-announced, Leaviss says it is possible savvy consumers will "frontload" consumption this month before easing off early next year. The net result, Leaviss fears, could be to "slow things down dramatically" and send the UK economy spiralling back into recession. Reports the Conservatives will announce a further rise in the VAT rate to 20% should they come to power will also serve to exacerbate the situation, he adds. "[The VAT reversal] will not only cause a blip upwards in inflation...