Small firms in the construction industry face a turbulent New Year

Published:  16 December, 2009

BLACKPOOL: 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.

In a survey of the Federation of Small Businesses (FSB) members in the construction sector, 43% said their trade had decreased and more than half (54%) said the cost of running their business had increased.

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% saw a rise in the cost of operating their businesses in the previous six months.

Of the 100 respondents in the survey, another third 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% said they have seen an increase in the number of companies paying late.

VAT on renovating homes – currently at 15% – 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.

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 5% on home renovation projects will encourage people to spend their money and give a crucial kick-start to the important, but struggling, construction industry.”

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