Over half of Welsh businesses would like to see tourism and construction VAT cut to five percent
The Federation of Small Businesses
(FSB) has told the Government that they would like to see VAT cut to five percent in the construction and tourism industries.
The request follows a slump in business confidence, as demonstrated in an FSB survey of 1,600 companies.
At the start of 2011, VAT was increased from 17.5 percent to 20 percent. However, the FSB has said that a cut to VAT now would improve consumer spending as well as create new jobs.
John Walker, the chairman of the FSB, 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."
He continued: “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 five percent 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.”
A new survey by Bibby Financial Services
found that over half (51 percent) of small businesses in Wales would like to see an immediate cut in VAT – an increase of 35 percent on a similar survey taken in 2010.
It was also revealed that 15 percent of companies would like to see the Government focus more on public spending in order to stimulate consumer confidence.
Terry Wolfendale, a spokesman for Bibby Financial Services, said: “It is clear from our research that businesses in Wales are feeling somewhat marginalised by the Government and would like to see David Cameron and his ministers do more to address their specific needs."
Wolfendale commented on SMEs’ position in the economy, adding: “Smaller firms are the economic engine of the UK that will help drive the economy, create jobs and boost growth. They are a powerful lobby not to be ignored – according to the Federation of Small Businesses, small to medium-sized firms employ approximately six in 10 of the private sector workforce, comprising some 13.7 million people and contributing more than half of the UK’s turnover.”
However, some parties disagreed with the findings, arguing that while a VAT cut would help the sectors to which it applied, it may prove difficult to implement as well as lowering tax taken by the Government in a time when public spending is already being cut.
Swansea University economist Professor David Blackaby said: “In terms of Wales we have an important tourism sector, which would benefit. The question is where do you get the tax revenues to fill the gap?
“We know that construction is highly cyclical and suffered early in the recession. If you could aid that sector it would not be a bad idea, but it would be difficult in practice to know when to make a cut or reverse it.”