UK construction companies hit hard by budget
Published:  22 June, 2010

LONDON: "The tax and VAT hike announced today will add to the distress of an already fragile recovery in the construction sector." said Phil Westerman, head of construction at Grant Thornton.

As consumers now face an increase to their tax bills and a rise in VAT, this will undoubtedly lead to a fall in the confidence they need to make larger scale purchases. Many will question if now is the right time to buy, if they have the funds to do so and if their jobs are secure.

"Another fear of a VAT rise is that it will lead to more cash strapped consumers resorting to cash-in-hand payments to builders for home improvements to avoid paying a higher rate of VAT," continued Mr Westerman. "This is a practice that can only lead to the unfortunate promotion of a cowboy culture, which we certainly don’t want to see increase.

"The past few years has seen the construction sector experience  a tumultuous period where it witnessed falls in volumes and prices, and rises in redundancies and business failures. With public sector spending cuts well on the way, it will mean that many construction contracts with larger contractors – including high value PFI agreements for schools, roads and hospitals – will be abolished.

Mr Westerman concluded: "Given that the majority of public sector construction contracts are with bigger players, smaller building companies will have a headache as they see larger builders vying for a slice of the cake they would not normally touch."

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