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Workloads for builders throughout the UK have increased with only the West Midlands and Wales showing a downturn reports the Federation of Master Builders in its State of Trade Survey for the Third Quarter 2000. However, the overall bouyancy is being undermined by increasing levels of red tape and the activities of cowboy builders profiting from the Government's inaction over the level of VAT. Despite the growing order books, for many builders it is a case of two steps forward and one step back.
Overall the national increase inr workload is 27%. However, both the West Midlands and Wales have reported a significant downturn of minus 16% and minus 56% respectively. In the West Midlands it is felt that the downturn can be contributed to the continuing economic uncertainty following the shut down of the Rover BMW plant while in Wales the poor result is largely due to the reducing number of local authority home improvement grants.
There has been a notable increase in work for specialist contractors, who have usually lagged behind general builders. The increase in workloads is led by repair, maintenance and improvement contracts for both private and social housing. These have shown an increase of 22% and 23% compared to the last quarter. Contracts for new non-residential buildings has also increased. Only for social new build has there been a continued decline. Work in this sector has fallen by a further 13% after the 23% decline for the second quarter. There is also evidence of a slowdown in the new house build sector. This showed an increase of only 8% against an expected increase of 17%.
Many builders, given the seasonal fluctuations in construction activity, expect some slowdown in building activity during the winter months. Only 3% of builders expect workloads to continue to increase.
Despite the current positive order book, growing levels of red tape are causing problems for many building firms out of business. Faced with an ever increasing level of bureaucracy, builders are having to spend more and more time in their offices dealing with costly and complicated regulations rather than being out on-site fulfilling building contracts. In addition to national and European workplace legislation, the building industry has its own specific bureaucratic headache: the Construction Industry Scheme. This new tax system for sub-contractors has proved to extremely time consuming and in practical terms is unworkable.
Furthermore, the increased demand for building work is increasing the activities of cowboy builders. By working on a cash-in-hand, no-questions-asked basis, rogue traders are able to undercut VAT registered builders by 17.5%. As a result, in order to compete the profit margins of many builders are so low that expansion plans and training programmes have been cancelled. This has serious implications for the long-term health of the building industry. Meanwhile the black economy continues to grow and is currently costing the Treasury some £20 billion a year in lost revenue.
These concerns have been put forward by the FMB to the Government which has responded and established working parties to examine how business bureaucracy can be reduced and how the CIS scheme can be improved. It is hoped that the forthcoming Chancellor's pre-budget statement will address the issue of VAT.
Ian Davis, Director General of the Federation of Master Builders warns:
"Whereas we warmly welcome the increase in orders, it must be remembered that these are short term. The long term viability of the building industry is threatened by red tape, the CIS scheme, low profits resulting in reduced resources for training and the issue of cowboy builders. The Government has listened to our concerns and is working with us to try to find solutions. Until then for many builders it is a case of two steps forward and one step back."
First posted: 13 November 2000. Last modified: 13 November 2000.
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