Federation of Small Businesses says rising costs and slowing trade could be 'devastating' for small construction firms

An increase in late payments from bigger companies is stifling cash-flow for small construction firms, causing further concern about rising costs and slow trade in the new year.

In a survey from the Federation of Small Businesses (FSB), more than half of 100 member firms said they had seen an increase in the number of companies paying late.

One third said they were worried about their business prospects over the next six months, with 43% noticing a decrease in trade and 54% noticing an increase in the cost of running their business.

John Wright, national chairman at the FSB, said: “Cash-flow is vital for the survival of a small business and the lethal cocktail of a continued decrease in trade and increase in costs could have a devastating impact on the construction sector.

"This is not helped by big businesses using small firms as a source of credit.”

The figures have improved since the same survey was taken in May, in which 60% cited a decrease in trade and 55% cited a rise in costs.

The FSB is calling for the VAT on renovating homes to be reduced from 15% to 5% to encourage homeowners to invest in new building projects and give a kick-start to the industry.

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