Not only is the September hike in VAT going to hit the small retail sector hard, so too is the Balearics government's decision to lift the ban on commercial development on the Son Fontanelles wetlands to the back of the Playa de Palma, according to Pimeco sources yesterday.
According to the federation, permission to go ahead with the long standing project to build a shopping centre will lead to closure of 1'000 shops and the loss of a significant number of shops.
When the Partido Popular (PP) won the regional elections over a year ago, it was widely expected that there would be a further change in bylaws to allow the commercial centre to be built and now that it has happened, the small retail sector is worried that they will be unable to compete with a large shopping centre in the area.
Pimeco also warned that while there may be a mini consumer boom before September 1 as consumers try to beat the VAT trap, the fact that civil servants have lost the Christmas bonuses and taxes have gone up while most employees have been forced to accept pay cuts will spark an even sharper down turn in trade as people will simply stop spending.
Pimeco are also worried about new laws coming in which will allow shopping centres to open on every day of the year and for longer hours.
Federation sources said that the situation on the high street is going to get much worse before it gets better.