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Wed October 28 2020

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FMB warns VAT increase will hit construction

21 Dec 10 The increase in VAT to 20% next month will lead directly to 11,400 construction jobs being lost by the end of the decade, the Federation of Master Builders (FMB) has warned, as well as a further 34,000 jobs from other industries.

FMB also fears that “rogue traders” offering VAT-free services “will flood the market”.

External affairs director Brian Berry said: “Construction has been badly affected during this recession so the VAT rise could not come at a worse time. The VAT increase will result in a two percent decrease in demand for domestic repair, maintenance and improvement (RMI) work which will mean 11,400 job losses in construction alone by 2019. This will seriously affect the recovery of the construction industry, when it comes, as there won’t be enough skilled workers available.”

Berry continued: “The government claims it wants to create a greener Britain but its decision to increase VAT will have the exact opposite effect. The job losses the VAT rise will create will mean that there will be even fewer skilled workers to do the energy efficient work required by the government’s Green Deal.”

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Although businesses and sole traders with a turnover of less than £70,000 do not need to be VAT-registered, and therefore will be quite legally able to immediately undercut larger companies by 20% on domestic jobs, FMB fears “rogue traders” will also benefit.

“Rather than saving 20%, many homeowners will lose their money either through shoddy work or the trader running off with a deposit and doing no work at all,” Berry said.

Berry concluded: “The simple solution is to reduce the rate of VAT on home repairs as this offers the best hope of encouraging take up of the government’s Green Deal as well as helping to create jobs in the construction sector.”

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