Current Issues - 3rd Quarter 2000 Once again, around a third of all FMB survey respondents accepted the invitation to add comments on either their state of trade, or issues that they are looking to their Federation to pursue on their behalf. As is usual, most of the comments this time relate to issues rather than the state of trade; and those mentioned most often are the same as those that headed the list throughout 1999 and the first half of 2000. These are the increasingly inter-linked effects of the Construction Industry Scheme (CIS) on the availability of sub-contractors and on the extent of unfair competition from tradespeople working for cash in hand, with those of the rate of Value Added Tax (VAT) on home improvements on competition in the private housing RM&I market. Very nearly half of all the written-in comments are addressed to these issues. Firms continue to report that tradespeople who used to work for them as sub-contractors have opted neither to register to continue in that role, nor to join up as direct employees, but to deal direct with the customer in the domestic market, where they work for cash in hand, and do not charge VAT on their services. Given the strength of total demand in this market revealed by this survey, it is not surprising that comments on this issue appear somewhat 'softer' when compared with those from preceding surveys. In most areas there is sufficient work for all. But there is fear of serious distortion of the market, to the detriment of firms registered for VAT, if demand should slacken. Besides CIS and VAT, the next largest number of comments, around 15% of the total, relate to recruitment and training, and the connected issue of the image of the building industry. Older respondents are concerned that the workforce is not being renewed as their generation reaches retirement, but they do not see any easy solutions. Indeed, some suggest that the situation is becoming more difficult, because many young people appear to them to be work-shy, and also to some extent on account of the effect on image of the activities of 'cowboy builders' - which links the recruitment and training issue back to that of the CIS and VAT. As is usual, there are still a number of complaints of late payment, both by larger main contractors to sub-contractors, and by clients, particularly public sector clients, and also about increased regulation, including the CIS, and the growing demands it places on proprietors of building firms, in respect of time spent on paperwork, etc. On this occasion, however, comments on these topics are matched by expressions of concern over the effects on small builders of the increased concentration in the builders' merchants sector. The report on the second quarter survey referred to comments on the stocking policy of the larger merchants, which have been absorbing many smaller firms. This time the focus is more on pricing of building materials sold through merchants, including the relative prices charged to trade and non-trade customers. In the opinion of several respondents, albeit put forward without any firm evidence, greater concentration amongst merchants has put upwards pressure on prices generally, and in particular on prices to trade customers, with the changed differential further adding to the distortion of competition in the housing RM&I market, not only between established businesses and 'cowboys', but also in comparison with do-it-yourself. First posted: 25 October 2000. Last modified: 25 October 2000.