Small businesses in the construction industry are worried about their prospects in the New Year
(14/12/2009)

According to a survey of the Federation of Small Businesses (FSB) members in the construction sector, 43 per cent said their trade had decreased and more than half (54 per cent) said the cost of running their business had increased. Small businesses in the construction industry are worried about their prospects in the New Year as costs are still rising and trade continues to be slow.

Things have improved over the past year: in a survey of the same panel in May, six in ten said trade had decreased and 55 per cent saw a rise in the cost of operating their businesses in the previous six months.

A third of respondents said they were worried about their business prospects over the next six months and that late payments from bigger companies were stifling their cash-flow – 54 per cent said they have seen an increase in the number of companies paying late.

VAT on renovating homes – currently at 15 per cent – is a concern for small construction firms, as they seem to be suffering from potential customers delaying starting new building projects in a recession. The FSB is calling for the VAT rate to be lowered to a flat rate of five per cent to give homeowners the incentive to spend and give a boost to the builders and small firms in the construction industry at a difficult time.

The Federation of Small Businesses is working with a coalition of organisations from within the construction sector to support the Get Britain Building campaign. The FSB has joined the Cut the VAT Coalition, which believes that reducing VAT from the current 15 per cent to five per cent for all maintenance and home improvement work would help the Government achieve its target of cutting carbon emissions by 80 per cent by 2050. It would also benefit millions of UK homeowners by getting rid of cowboy builders, helping those who cannot afford vital repairs to their homes, bringing our empty properties back into use and protecting the countryside.

John Wright, National Chairman at the Federation of Small Businesses, said: “The construction industry is one of the sectors that has been hardest hit during the recession as people have been cutting back on developing new properties or refurbishing their homes. Cash-flow is vital for the survival of a small business and the lethal cocktail of a continued decrease in trade and increase in costs could have a devastating impact on the construction sector. This is not helped by big businesses using small firms as a source of credit with more than half of respondents seeing an increase in the number of late payers.

“As we approach the New Year, small businesses in the construction industry and builders need to be the best position possible if they are to survive. Lowering the VAT to a flat rate of five per cent on home renovation projects will encourage people to spend their money and give a crucial kick-start to the important, but struggling, construction industry.”