Tax breaks for small firms and commitment to public spending are welcomed by the industry, but a hike in National Insurance contributions takes the shine off
The construction industry has given Wednesday's Budget a lukewarm reception despite a range of measures designed to help small businesses.

Stamp duty exemptions, tax incentives, money for training and lower corporation tax were all cheered by the construction industry, but the good news was overshadowed by Gordon Brown's decision to raise employers' National Insurance contributions by 1%.

The industry has also been left nonplussed by the government's refusal to reduce VAT on repair and maintenance work.

The Civil Engineer Contractors' Association warned that the hike in NI would encourage bogus self-employment, and the Federation of Master Builders' director general Ian Davis predicted that building companies "could see a 10% chunk fall out of their income."

The number of composite companies will also increase, according to the Electrical Contractor's Association (ECA). These are firms that avoid National Insurance contributions by paying the national minimum wage to its employees and making up the rest of the salary with dividends.

The unchanged 17.5% VAT rate for repair and maintenance work will continue to encourage cash-in-hand rogue traders, said the ECA, which had called for a reduction to 5%. However, the government did make a minor concession by reducing to 5% VAT on building work that involves converting non-residential properties into old people's homes.

Despite its gripes, the industry broadly welcomed the measures aimed at reducing the tax burden for small firms. Corporation tax has been cut from 10p to zero for companies with annual profit of less than £10,000 and from 20% to 19% for companies with profit of less than £300,000 a year.

The Budget also offered a flat rate of VAT for all companies with an annual turnover of up to £150,000, which is designed to simplify the calculating of tax payments.

The Construction Confederation and ECA were among groups that praised changes to the Construction Industry Scheme aimed at easing cashflow problems for small contractors.

Under the new measures, subcontractors that have deductions made from their income will no longer have to wait until the end of their accounting year to offset them against other liabilities. Deductions can now be set off against other PAYE and National Insurance contributions.

There were a number of measures affecting specific sectors of the industry. Urban regeneration was given a boost with the abolition of stamp duty on commercial properties in 2000 deprived areas, and the chancellor announced new tax breaks for green technologies.

Five more energy-saving innovations will qualify for capital allowances, including radiant and warm air heaters, energy efficient refrigeration equipment, solar heaters and heat pumps.

The government is cracking down on industry tax dodgers, too. Firms found falsely claiming that sand or aggregate is for use in tax exempt areas will be forced to pay the £1.60 per tonne tax and an additional fine. Persistent offenders will face heavier fines of double the levy. Companies using sand to make glass will be exempt from the tax.

There was a boost for innovators within the industry with the announcement of £400m worth of tax credits for research and development in large companies.

Gordon Brown also announced £30m for training to help small firms attain Investors in People status. Builders should also benefit from the £20m earmarked for building or improving community sports centres, and tax breaks will also encourage amateur sports clubs to upgrade facilities.

The National Federation of Builders' deputy chief executive Barry Stephens said that the chancellor's measures merely "tinkered at the edges" and did little to safeguard the future of the industry.

What will reassure the industry is the huge amount of new investment pledged for the NHS and Gordon Brown's upbeat assessment of the UK economy. In the Budget, he announced that the Treasury has revised the economy's rate of trend growth from 2.25% to 2.75%, which may soothe some of the construction industry's irritation caused by higher NI bills.