Cutting VAT on "labour intensive and locally-provided" services could help small businesses in the UK, one industry body has claimed.
According to the Federation of Small Businesses (FSB), the move, which is an EU proposal, would help firms involved in activities such as home improvements.
Tina Sommer, EU and international affairs chairman for the body, said: "As the credit crunch bites, some of the first luxuries to go will be home improvements, eating out and a trip to the hairdressers, so local businesses in these areas will welcome this move."
By taking advantage of this proposal, the government can help the high street survive the current economic downturn, she added.
Meanwhile, the British Chambers of Commerce has warned that the UK is facing a recession.
According to the body, business confidence plunged in the second quarter and this, combined with falling demand for goods and services in the UK, could mean the nation experiences negative growth.
