A CALL for a cut in VAT within the construction sector has been met with mixed responses as buildings firms look for a longer-term solution to the current crisis.

The Federation of Small Businesses (FSB) has called for VAT to fall to 5% for the building sector in order to help stimulate spending.

VAT increased from 17.5% to 20% at the start of the year, but the FSB believes that cutting it for the construction industry now would help to create jobs and boost consumer spending – something it believes the Government’s growth plans have failed to do.

The FSB believes that evidence from other EU countries suggests that any lost revenue to the Exchequer by making VAT cuts would be met by earnings from additional demand, jobs and the wider economic activity.

The call forms part of a wider report by the FSB which shows that businesses were less confident in the second quarter of 2011 than they were at the start of the year, with five sectors falling from a positive to a negative reading.

The organisation also highlighted the tourism sector as another candidate for a 5% VAT rate, with the industry still struggling as a result of cheap air fairs and cuts in Government funding.

FSB chairman John Walker said: “The economy is still in a fragile state and these figures clearly show that the Government’s growth strategy is just not working.

“In an economy characterised by high unemployment and muted demand, more needs to be done to encourage businesses to take on staff and grow their business so that the recovery can really get back on track.

“We now need the Government’s actions to match its rhetoric and it must finally deliver on actions in its growth strategy.

“We must see a cut in VAT to 5% in the construction and tourism sectors to boost consumer demand.

“It is tangible measures like this that will actually help small businesses to be able to grow their businesses and grow the economy.”