The UK VAT rate goes up next month and retailers are hoping publishers lower the cost of their games.

One of the new Conservative government's austerity measurements has been to increase the VAT rate from 17.5% to 20%, due to take effect from January. According to a report from MCV retailers are hoping that this will not affect the cost of games.

Retailers in the UK are trying to convince publishers to lower their costs so that they can buy the games at a lower price and not have to raise the cost for customers. At present it seems that retailers will either have to increase the prices or swallow the difference themselves and neither is a particularly appealing option for them.

Currently none of the biggest publishers, such as EA, Ubisoft, 2K, THQ, have commented on whether they will or not. Speaking to MCB Barkman Computers boss Nick Elliot stated “I am concerned about the effect it will have in the short term". Retailers are stating that their margins are small enough as it is and having to swallow the VAT rise will make the situation even worse.

“The issue is with new games – if publishers don’t adjust cost prices it’s pointless to stock them. Customers already think that the RRP is �39.99 and some are calling for it to be dropped further. We would be looking for some form of price movement from publishers.”

- Matthew Brady, Game On MD.

One publisher however commented that when the VAT rate was temporarily lowered in 2008 retailers would have been angry if publishers increased the cost and suggested it should work both ways. We will have to wait and see what happens when the VAT rate rises.