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Stocks fell on October 27th after the Chancellor of the Exchequer announced a 0.5% increase in VAT.

The UK’s FTSE 100 index dropped by 1.1% on October 27th, following the Budget announcement that VAT would be increased from 20% to 21%. The change will be implemented in 2022, which means that it won’t affect consumers until they are paying for their Christmas shopping next year. The Chancellor of the Exchequer Rishi Sunak made this announcement as part of his Autumn Budget statement, which was unveiled on October 27th at 11:30am. This is a significant drop in value for the index, but why did stocks fall today?

What is VAT?

VAT stands for Value Added Tax and is essentially a tax that businesses pay on goods and services that they sell to customers. It’s also known as sales tax or turnover tax in some countries. For example, if you buy a pair of shoes from a shop in England with an item price of £50, then you will pay £53 when you purchase them because there is 20% VAT added to your bill.

Why did stocks fall today?

The stock market often moves based on consumer confidence levels and what people think about where things are going in the future. While there was no major economic news released alongside this change to VAT, it can be assumed that people aren’t particularly happy about having to pay more for things they buy regularly.