4th Quarter 1999 - Current Issues Once again, 30% of all the respondents to the FMB survey have accepted the invitation to add comments on the state of trade in their areas or on current issues affecting their businesses; and the main issues highlighted this time are the same as in each of the three previous surveys carried out in 1999. Heading the list is the concern felt over the new arrangements for the taxation of sub-contractors in the construction industry, which is interlinked with two other persistent issues - the amount of paperwork involved in compliance with new legislation and regulations, and the size of the black economy. As already noted in the section on the labour market, the main issue arising from the new tax deduction scheme is the reaction of those skilled operatives who used formerly to form part of the pool of labour available for employment as sub-contractors, who have opted not to continue to make themselves available on that basis, but are offering their services direct to clients, in competition with the firms for which they used to work. The market sector most affected by this shift is repair, maintenance and improvement of private housing. In adopting this course, they are further altering the balance in that market sector between firms that required to charge VAT on their services, and those who, whether legitimately or as members of the Black Economy, work for cash and without charging the tax. This provides an additional spur to those survey respondents calling for a change in existing tax arrangements relating to private housing RM&I work, with the possible solutions they propose including a reduced rate of VAT, or lowering or indeed abolition of the registration threshold. This shift is making it even more difficult for VAT-registered firms to recoup increases in costs by way of higher prices. However, according to some respondents, it is not only in dealings direct with the customer that they are experiencing resistance to price increases and, therefore, added pressure on profit margins, but also when they are selling their services to main contractors. Some respondents again take a longer-term view of the labour market, and express concerns over the present situation with regard to training in construction skills. They are concerned not only with the level of training provision but also with the quality of training. They fear a more severe shortage of skills in a few years time, as more older and experienced workers retire from the industry. The 'current issues' section of the report on the third quarter FMB survey noted the reappearance of comments indicating concern over late payment by customers, which were notably absent from the first two surveys in 1999, but are present again this time, when complaints are raised over the payment performance of public sector as well as private sector clients. Late payment by main contractors is another concern that was not mentioned in comments earlier in 1999, but has reappeared in the fourth quarter survey, in comments from specialist contractor respondents. This survey is also the first in the year in which the invitation to add comments has attracted remarks on the state of the economy and on the Bank of England's monetary policy, and how they may affect the workload prospects of small and medium-sized building firms, particularly in the private housing RM&I market. The survey has found this market holding up in the fourth quarter of 1999, at least a little more than had been anticipated in the third quarter, even though interest rates had begun to rise again. Whilst one or two respondents say this was already affecting the level of enquiries for future work before the end of 1999, others indicate that they see the market as being very finely balanced at the present time, and express the fear that any further increase in rates would lead to a downturn. First posted: 25 January 2000. Last modified: 25 January 2000.