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Three ways to help construction

SMEs need working capital, cash flow support and moves to help them win work

The construction sector has been a mainstay of the UK economy in recent years, representing 9 per cent of GDP and by 2007 employing roughly two million people. Yet the past 12 months have seen that building boom turn to bust.

What the industry needs is action. In the November pre-Budget report, the Government said that it would bring forward £3 billion-worth of capital spending from the 2010-11 budget.

Yet, within weeks, Construction News reported that nearly £1.7 billion of the Government’s health and education projects had been halted. There’s a serious gap between ministers’ words and their actions.

Three ways to help

So what can be done? I would make three suggestions: securing working capital, helping cash flow and enabling small and medium-sized construction firms to win more work.

First, we need to help the sector secure the working capital it needs. This is why the Conservative Party has called for a £50 billion National Loan Guarantee Scheme. But during a recession, construction also needs help with its cash flow. So we have set out practical ideas that will provide direct help.

These include deferring VAT payments for up to six months; cutting payroll taxes for firms with fewer than five employees; and, in due course, cutting the main rate of corporation tax from 28p to 25p and the small company corporation rate from 22p to 20p. Yet cutting costs won’t save most firms in a recession: they need to win more work.

We want to enable the sector to help us make the existing housing stock more energy efficient.

Our plan would help to kickstart home energy efficiency works by entitling householders to secure approved home energy efficiency works worth up to £6,500. The cost of this work would be recovered through future energy bills, for anything up to 25 years, but the payback in lower fuel consumption would be substantially shorter.

The second step for SMEs in the sector to win more work involves making it easier for them to compete for public sector contracts.

At present, the public procurement rules are needlessly complex. Take the rule which many public bodies apply: that you can only bid for a contract if you can first show three years of fully audited accounts.

Or how about the fact that, even before bidding for a contract, firms often have to prequalify not once, but time after time. The forms and questions are often the same, yet many departments and public agencies demand repeated pre-qualification.

This has to stop. That’s why we have made it clear that the three-year rule must go and why we will ensure that contractors need pre-qualify only once in any sector for contracts worth up to £50,000.

We have heard many announcements from ministers, but they have singularly failed to provide the practical support that is needed. For many in construction, time is running out.

Mark Prisk is the Tory shadow business minister