The FMB’s latest state of trade survey also found that approximately 20% of small building firms reduced the size of their workforce after the VAT increase from 17.5% to 20% last year.
Director of external affairs Brian Berry said: "The FMB warned the Government at the time that raising the rate of VAT to 20% would suppress demand for building work and cost jobs. Unfortunately our prediction has been borne out by our latest research which shows that the VAT increase is hurting the very small businesses that the government is looking to for economic growth."
Mr Berry continued: “More than 200,000 construction jobs have been lost since 2008 when the UK economy was hit by recession. There are obviously a large number of different factors affecting employment in the construction industry, but we do know from these survey findings that the rise in VAT has made things worse. A separate piece of research by the analysts at Experian estimates that nearly 4,000 jobs were lost in the housing RM&I market last year as a result of the rise in VAT. When the effects of ‘the multiplier’ are added in, the total employment loss to the UK economy could have reached 10,254 by the end of last year, and may rise to more than 17,360 by 2020.”
He concluded: "The research also shows that a targeted reduction in the rate of VAT on just the labour element of domestic repair maintenance and improvement (RM&I) works could cost as little as £161m but could generate a total stimulus effect of £1.7bn and create 34,400 jobs by the end of 2012. Such a cut could also release £374m of public money to refurbish over 20,000 units of social housing stock and help meet the government’s energy efficiency objectives. As the economy stalls the government should be re-examining the case for a cut in VAT as a targeted reduction would help generate much needed jobs and growth on a very limited budget.”
The FMB leads the Cut the VAT Campaign, which calls on the government to reduce VAT on all home repair, maintenance and improvement work from 20% to 5%.
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