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4 January 2011
Last updated at 04:37 ET
A group which represents NI retailers has warned that the VAT rise will slow down NI's economic recovery and will cost jobs in the retail sector.
The NI Independent Retail Trade Association (NIRTA) said the rise from 17.5% to 20% was at a time when local retailers were already struggling.
NIRTA said businesses are also having to cope with increases in energy and transport costs.
Consumer spending is expected to fall in the first quarter of 2011.
The Chief Executive of NIRTA, Glyn Roberts, believes the rise in the rate of VAT will turn out to be completely counterproductive.
"I think this is a major mistake by the coalition government at a time when we need to stimulate consumer demand," he said.
"We need to get people spending more.
Continue reading the main story Eddie O'Gorman, business reporter
Most NI companies will have little option but to pass the VAT rise on to consumers in the form of higher prices, but there are those who will be worried about how it will affect their business at a time, just after Christmas, when demand tends to be flat anyway.
Some companies may absorb the increase, at least for a time, and try to compensate by cutting costs elsewhere. But given that businesses have been cutting costs wherever possible since the onset of the recession, this could prove difficult.
Among the hardest hit will be the motorists. Prices at the pumps have already been rising steadily because of the increase in the price of oil. A litre of unleaded is heading towards £1.30 in many outlets, with diesel having already reached that level.
Heating oil qualifies for the reduced rate of VAT for domestic and residential use, but for businesses, it is at the standard rate, which makes it another hefty addition to their overall costs.
"I think this is the wrong way to go and I think there is also a considerable hassle factor for small retailers having to change all of their pricing, effectively on a bank holiday and so soon after the New Year."
'Difficult year' Martin McCrossan, Chairman of Derry City Centre Traders' Forum, said many shop owners are already struggling.
"They don't want to scare away the punters and what they're trying to do is to absorb the price increase so that it won't really affect people coming into their business.
"The previous weeks before Christmas, that was a complete disaster and as everyone knows, it's the few weeks of Christmas that actually pay the bills for January, February and March.
"I have no hesitation in saying that this is going to be a very difficult year and with the VAT increase, it's not going to be easy."
Garbhan O'Doherty has property interests in Londonderry and London, and runs pubs, hotels, and off-licences in the north-west.
"The price of a pint, unfortunately, must go up due to the VAT increase primarily," he said.
"The suppliers want to put an increase on as well, because in the world markets the various commodities are rising in prices.
"There's certainly upward pressures on pricing which is not good news, all round," he warned.
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The NI Independent Retail Trade Association (NIRTA) said the rise from 17.5% to 20% was at a time when local retailers were already struggling.
NIRTA said businesses are also having to cope with increases in energy and transport costs.
Consumer spending is expected to fall in the first quarter of 2011.
The Chief Executive of NIRTA, Glyn Roberts, believes the rise in the rate of VAT will turn out to be completely counterproductive.
"I think this is a major mistake by the coalition government at a time when we need to stimulate consumer demand," he said.
"We need to get people spending more.
Continue reading the main story Eddie O'Gorman, business reporter
Most NI companies will have little option but to pass the VAT rise on to consumers in the form of higher prices, but there are those who will be worried about how it will affect their business at a time, just after Christmas, when demand tends to be flat anyway.
Some companies may absorb the increase, at least for a time, and try to compensate by cutting costs elsewhere. But given that businesses have been cutting costs wherever possible since the onset of the recession, this could prove difficult.
Among the hardest hit will be the motorists. Prices at the pumps have already been rising steadily because of the increase in the price of oil. A litre of unleaded is heading towards £1.30 in many outlets, with diesel having already reached that level.
Heating oil qualifies for the reduced rate of VAT for domestic and residential use, but for businesses, it is at the standard rate, which makes it another hefty addition to their overall costs.
"I think this is the wrong way to go and I think there is also a considerable hassle factor for small retailers having to change all of their pricing, effectively on a bank holiday and so soon after the New Year."
'Difficult year' Martin McCrossan, Chairman of Derry City Centre Traders' Forum, said many shop owners are already struggling.
"They don't want to scare away the punters and what they're trying to do is to absorb the price increase so that it won't really affect people coming into their business.
"The previous weeks before Christmas, that was a complete disaster and as everyone knows, it's the few weeks of Christmas that actually pay the bills for January, February and March.
"I have no hesitation in saying that this is going to be a very difficult year and with the VAT increase, it's not going to be easy."
Garbhan O'Doherty has property interests in Londonderry and London, and runs pubs, hotels, and off-licences in the north-west.
"The price of a pint, unfortunately, must go up due to the VAT increase primarily," he said.
"The suppliers want to put an increase on as well, because in the world markets the various commodities are rising in prices.
"There's certainly upward pressures on pricing which is not good news, all round," he warned.
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