Builders in call for VAT cut to give sector fillip

Sales tax increased from 17.5 to 20 per cent in January, but support is growing for a new 5 per cent VAT rate on home building improvements, according to the latest Scottish construction monitor.

More than 40 per cent of Scottish Building Federation (SBF) members surveyed in the quarterly research, out today, identified a cut in the VAT rate on home improvements as the single most effective measure the coalition government could take to boost the industry.

Builders north of the Border want the Scottish Government to put more pressure on Westminster to reduce home improvements VAT to the minimum of 5 per cent allowable under EU law.

Michael Levack, chief executive of the SBF, 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.”

An improvement in bank lending and increased public investment in house building would also give the industry a much-needed boost, builders said. Levack called for more government pressure on banks to ease their lending restrictions and be more supportive of building firms.

“The issue of bank lending and a general lack of affordable credit also continues to weigh heavily on the minds of many. 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,” he said.

Construction industry confidence has improved in the last three months, the survey revealed. But seven in ten firms said they were uncertain about the outlook for business over the coming year and the SBF described the prospects for sustainable long-term recovery in the industry as “extremely fragile”.