The office of Fair Trading has found that anti-competitive business practices such as cartels and price-fixing are harming a third of small and medium-sized construction firms.

Research commissioned by the OFT shows that one in three smaller construction firms believes it is harmed by unfair practices, and four in 10 firms say they are aware of anti-competitive practices in their sector. The disclosure comes after a series of OFT raids on the construction sector, including a crackdown on roofing cartels.

The research, carried out among managers of 500 small and medium-sized enterprises, also revealed one in five companies felt it had been the victim of anti-competitive behaviour.

Practices highlighted most often included cartels, price-fixing and collusion to set tender prices.

However, only 23% said they would report price-fixing arrangements to the competition authorities, with 13% prepared to report a larger competitor trying to force them out of the market by cutting its prices below cost.

Penny Boys, executive director of the OFT, said too many companies shied away from going through legal channels. She said: “The research revealed that the majority of SMEs respond to the anti-competitive behaviour of rivals by altering their own working practices, rather than exercising their rights and seeking recourse to competition legislation for protection.”

Boys said the OFT could be lenient with firms providing information about anti-competitive behaviour in which they are, or have been, involved. She said: “The OFT has introduced mechanisms to encourage businesses to come forward and report anti-competitive behaviour.

It is crucial that SMEs recognise that the most effective response to maintaining and developing competitive markets is to use all the strategies open to them, including working with competition authorities.”

Boys warned that companies involved in anti-competitive behaviour risked significant financial penalties and eventual damage to their own businesses. She said: “Businesses operating as part of a cartel will lack the agility of a competitive business to respond to challenges in the market. In the long term, they may find they have not invested sufficiently in their businesses to survive changing market conditions.”

The survey was compiled by NOP World, SME Omnibus on behalf of the OFT.