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VAT cut 'would boost small businesses'

Date Added: 20/07/2011  

Cuts to VAT in certain sectors could provide a boost for small companies, perhaps helping them to avoid the threat of a winding up order in the future.

Research by the Federation of Small Businesses (FSB) has found confidence across industry has fallen in the last three months.

Figures for the second quarter of the year show the FSB's 'Voice of Small Business' Index dropped by 6.4 points, to stand at +0.3.

The organisation expressed concern at the results of its poll, with confidence among hotels, restaurants and bars - key areas for the growth of the economy - falling.

National chairman of the FSB John Walker warned the UK's economy remains in a fragile state at the moment.

"These figures clearly show that the government's growth strategy is just not working," he said.

"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."

Mr Walker added the fact the confidence index has fallen towards a figure of zero is "worrying", especially as the FSB's index has proved to be such a good barometer in recent times.

He therefore called for the coalition government to cut VAT in the construction and tourism sectors to just five per cent from the current level of 20 per cent.

The FSB chairman claimed this would boost consumer confidence and lead to the economy being stimulated.

In a report released earlier in the month, the organisation called for a reform of the planning system, claiming applications from small businesses should be fast-tracked.

Over half of the companies surveyed by the body said they believe the current process is overly complex, while only one per cent of firms had submitted plans for large developments.

Posted by Julie Cutts

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