Rogue traders are undermining the construction sector by stealing a major slice of the business available, the Federation of Master Builders (FMB) Scotland has said.
The association called on the Westminster government to make an immediate cut in VAT to just 5% in order to kickstart an industry which has been in the doldrums since the economic downturn began in 2007/08.
FMB Scotland director Grahame Barn said the imposition of a 20% VAT rate and the cuts in public sector contracts were a ”double whammy” that had stymied the sector.
A survey published by FMB Scotland on Monday found small and medium-sized (SME) construction firms had continued to see a decline in trading conditions during the third quarter of 2011.
A total of 46% of responses were negative while those providing positive feedback fell from 23% to just 13% during the period.
The outlook for growth in the wider UK marketplace was similarly pessimistic with reported falls in workloads across all sectors, a reduction in new business enquiries and weak prospects for employment.
Mr Barn said: ”The move up to 20% VAT had a real impact and it almost became immediate for people to say: ‘what price for cash?’
”It really has been a rogue traders charter and companies that are trying to operate within the law and pay the VAT are struggling.
”What would help going forward would be the reduction of VAT to 5% for energy-efficient repair and maintenance improvements to our housing stock. That is a UK Government issue.”
Mr Barn said earlier research carried out on behalf of FMB Scotland by information services firm Experian showed the strength of the black economy.Cash-in-handHe said as much as half of the available building work in Scotland was now being grabbed by rogue traders happy to waive VAT for cash-in-hand payments.
Mr Barn said the Treasury was missing out on millions of pounds in VAT revenues by putting the legitmate construction sector at a competitive disadvantage.
”The Exchequer is losing tax revenue and work is going to companies that consumers really have no comeback with,” he said.
”We have local companies employing local people that are up against an unfair disadvantage. That does not bode well for future employment prospects or for companies taking on apprentices.
”We will continue to see local construction companies failing over the next few years with the consequent job losses and lack of opportunity for young people coming into the industry.
”We need the UK Government to cut VAT to 5% and allow the legitimate construction industry to begin working again.”
Mr Barn said a strong construction sector would help Scotland as a whole to return to economic stability.
”We have now seen conditions deteriorate every quarter for three and a half years and if anything they are getting worse,” he said.
”Construction SMEs can help rebuild Scotland by creating more jobs, supporting economic growth and creating a greener more sustainable economy, but only if they have favourable conditions to trade in.
”Measures to help support construction must be at the forefront of the Scottish Government’s agenda,” he added.