Cutting the rate of VAT payable on home building improvements to 5% should be the number one Government priority to support the construction sector, a new survey of industry bosses has found.

More than 40% of firms responding to the latest Scottish Construction Monitor (see attached report), a quarterly survey of the Scottish Building Federation’s membership of more than 700 individual construction firms, said a targeted VAT cut would be the single most effective measure Government could take to boost the industry at the current time.

Control over VAT rates is currently reserved to the UK Treasury. But the survey results suggest a large number of construction industry employers want the Scottish Government to apply further pressure at Westminster for the rate of VAT payable on home building improvements to be slashed to the minimum level allowed by EU law.

The practical effect of this measure would be to save consumers 15 pence in every pound they spend on having construction work done to repair, maintain or improve their home. Industry campaigners including the Scottish Building Federation have consistently pointed out a range of other benefits the policy would deliver – including making homes greener and more energy efficient, supporting apprentices in the construction sector and driving ‘cash-in-hand’ rogue traders out of the industry by eroding their competitive advantage over legitimate VAT-registered building firms.

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The new industry survey found improved bank lending to be the second most popular policy measure to support the industry, while increased public investment in house building emerged as third most popular.

The survey also found an improving picture of overall confidence within the industry with the latest confidence rating having risen by 16 points from MINUS 22 last quarter to MINUS 6. However, 70% of those completing the survey described themselves as less confident or as neither more nor less confident about the prospects for their business over the next 12 months compared to the past year. The Scottish Building Federation says this suggests that the prospects for sustainable long-term recovery in the industry remain “extremely fragile”.

Commenting on the survey results, Scottish Building Federation Chief Executive Michael Levack said: “Cutting VAT on home building improvements has been a long-standing campaign issue for the industry. This new survey demonstrates once again how strongly our members feel about the issue – and how much they believe it would benefit consumers and the industry if a targeted VAT cut were implemented.

“The issue of bank lending and a general lack of affordable credit also continues to weigh heavily on the minds of many. This is an area where politicians at all levels of Government need to exert more pressure on the banks to ease lending and be more supportive of building firms with a sound financial track record. If the Scottish Government were to invest more money in capital projects, this survey also shows that the industry believes building more houses should be the number one priority.”

Commenting on the latest industry confidence rating, Mr. Levack concluded: “Compared to previous quarters, it is clear that levels of confidence within the industry are improving. But it is worth bearing in mind that these improvements come from a very low base, reflecting the grim conditions the industry has recently endured. The large number of firms who remain less confident or no more confident about their future prospects compared to the past 12 months suggests to me that any recovery in our industry remains extremely fragile.

“I hope the Scottish Government will take careful note of these survey results and focus some additional effort on delivering those policy measures which clearly matter most to those working in Scotland’s strategically important construction industry.”

(GK)