THE future today looks bleak for many of the 600 people employed within the island’s fulfilment industry.

While the first part of chancellor George Osborne’s Budget statement yesterday on the wrongly-called VAT ‘loophole’ offered hope, it soon became clear that any reprieve would be short-lived.

In the graphic words of one fulfilment boss: ‘It’s good and bad. The guillotine has been hoisted – and it will fall.’

While a £3 reduction of the VAT relief to £15 is far from disastrous for businesses sending CDs, DVDs and vitamins from the island, the promise that the government will work with Europe to find a way of ending the ‘exploitation’ was much more ominous.

Worse, if the ‘workable solution’ does not materialise, Mr Osborne said he would revisit the issue in a year’s time and find a way through his next Budget.

A year is a long time in politics – and the Coalition government may not survive the next 12 months – but, taken at its word, this represents a serious threat to the fulfilment industry.

While yesterday’s small reduction smacked of showboating for British retailers at little cost to the Exchequer, the intention to find a way of halting the claimed £130m. in lost VAT would appear in earnest.

Reducing the relief further would have proved too costly – for every £15 item it applies to only £3 in tax will be collected and that has to be offset against hefty collection costs – but agreeing with Europe to exclude or penalise goods such as music and films would be far preferable.

If that is achieved, Commerce and Employment’s insistence that fulfilment businesses are here for more than just VAT relief will be severely tested.

Tesco, for one, has already stated that it does not want to be here but cannot afford not to be while VAT relief gives its competitors such an advantage.

Without that tax break, the island’s obvious disadvantages – high land prices, shortage of premises, tough building regulations, high staff and transport costs – come into play.