The Government must cut tax on construction firms to 5 per cent to help restore economic growth, the Federation of Small Businesses has said.
The FSB is calling on the Government to follow the lead of other EU countries and cut VAT in the construction and tourism sectors for a year to “help give the economy a real boost”.
By targeting VAT cuts in construction and tourism, the FSB believes that small firms will be able to drive job creation and boost consumer spending – something the Government’s growth plan has so far failed to do.
John Walker, FSB national chairman, said: “We now need the Government’s actions to match its rhetoric, and it must finally deliver on actions in its growth strategy. We must see a cut in VAT to five per cent in the construction and tourism sectors to boost consumer demand. It is tangible measures like this that will actually help small businesses to be able to grow their businesses and grow the economy.”
The FSB says that evidence from other EU countries shows that any lost revenue to the Exchequer by making VAT cuts will be met by earnings from additional demand, jobs and the wider economic activity.
It says its index – which measures the confidence of small businesses across the UK – has been a good predictor for the path of economic growth since it began in 2010.
FSB figures show that businesses were less confident in the second quarter of 2011 than they were at the start of the year as the FSB ‘Voice of Small Business’ Index fell by 6.4 points in the first quarter from +6.7 to +0.3. The FSB is concerned that construction confidence only rose by one point to +3 in the second quarter.