The Federation of Master Builders has warned that small firms are not feeling the benefits of the current upturn in construction orders.

The federation’s State of Trade Survey for the fourth quarter of 1999 says that, despite an increase in workload in the last three months of the year, subcontractors are fearful that decreasing profit margins will affect their medium- and long-term profitability.

The survey put the falling margins down to the new tax scheme for small firms, which it says has allowed companies in the black economy to offer larger discounts relative to legitimate companies.

It also warns of increasing cash flow problems for trade contractors as a result of an increase in late payment by public and private sector clients and main contractors.

This week, London-based contractor CJ Sims went into receivership because of cash flow problems. Last week, two other small firms, Porter Builders and Timtec International, failed.