Small firms in the construction sector are calling for a lower VAT rate on home renovations while struggling against a backdrop of badly decreasing trade, according to a new survey by the Federation of Small Businesses (FSB).

The survey, which canvassed the views of a specialist panel of FSB members in the construction sector, showed that 59% of respondents said their trade had decreased in the last six months and that 37% were concerned their financial prospects for the future were poor.

The lack of demand in the private and public sector was the key factor identified by 49% of small firms as most negatively affecting their business and causing the downward spiral in trade.

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Small firms have identified the VAT rate on renovating homes, currently at 15%, as a concern, as it prevents potential customers from hiring their services in new building projects.

The FSB is working with the Federation of Master Builders on a campaign 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 an already difficult time.

Other concerns about the decrease in trade cited in the survey were the cost of resources (9%) and regulatory burden (12%). Some 53% of firms also said more and more companies had started paying them later over the last six months.

John Walker, National Policy Chairman for the FSB said: "Confidence in the smaller building projects around the country has dropped to a low, and people who were thinking of adding an extension to their home, renovating their bathroom or building a garage, should be given the incentive to go ahead. Lowering the VAT rate on home renovation projects will encourage people to spend their money and give a vital kick-start to the important, but currently beleaguered, construction industry. It will also help the Government to meet its carbon emission targets by encouraging green home renovations."

(CD/JM)