Taxed Choosing Cheap Contractors

Clients could face a tax of 0.5% of construction costs if they choose contractors who don’t invest in research and development or skills training.

21st October 2016

The Farmer Review of the UK Construction Labour Model warns the industry faces “inexorable decline” unless major changes are made. It highlights construction’s “dysfunctional training model”, lack of innovation and collaboration and “non-existent research and development culture.”

Author and consultant Mark Farmer said the needs of construction firms and the clients who hire them are out of step. He said:

“If you buy a new car, you expect it to have been built in a factory to exacting standards, to be delivered on time, to an agreed price and to a predetermined quality. This needs to happen more in construction, so that the investors, developers or building owners hiring construction firms increasingly dictate the use of modern methods of delivery and invest appropriately in the skills agenda to grow this part of the industry.

“There are more similarities between manufacturing and construction than many people are led to believe and this perception needs to change, starting in the housing market”

One recommendation set out for the medium term is a “carrier bag charge” style behavioural deterrent scheme. This would levy a tax on businesses who buy construction work in a way that doesn’t support industry innovation or skills development.

Clients could face paying a suggested levy equal to 0.5% of a scheme’s construction cost but would avoid paying this tax completely by commissioning construction in a more responsible way. Farmer said:

 “The construction industry is in dire need of change. What is clear to me following the nine months spent conducting this review is that carrying on as we are is simply not an option. With digital technology advancements pushing ahead in almost every other industry and with the construction labour pool coming under serious pressure, the time has come for action.

“Unless we find some way of promoting innovation in construction and making the work less labour intensive and more attractive to new entrants, there’s a very real danger of the construction sector going into an inexorable decline over the next few years.

“I hope this review generates some debate in the sector and all involved can consider their role in safeguarding the industry’s long term health.”

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