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BMF warns of £1bn VAT Brexit-bombshell

Builders merchants could have to pay £1bn extra VAT post-Brexit if a suitable customs agreement is not reached.

That was the warning issued today (July 19) by builders merchants trade association, the Builders Merchants Federation. The BMF says that, if builders merchants are forced to pay 20% VAT upfront on European timber and other building materials, the extra VAT cost could run to £1bn.

With Parliament having voted this week to ban the UK from raising taxes bound for the EU unless the EU also collects tax for the UK, businesses in the UK face having to pay 20% more upfront for imports from the EU before goods can leave EU ports, should the UK exits the EU without a mutually beneficial customs arrangements,

Building supplies will be particularly impacted, with a knock on effect on costs of construction and, potentially, the UK housing market.

60% of timber used in UK building comes from the EU, mainly Sweden, Finland and Latvia, and the added costs are £1billion.  For bricks, imported mainly from Belgium and Holland, the post Brexit changes would add costs of £160m, while for paint, which comes from across the EU, added costs are estimated to be around £80m.

The BMF has warned of serious and immediate implications for cashflow, costs and prices, given that the UK is heavily reliant on imports for materials such as timber, bricks and paint. John Newcomb, Chief Executive of the Builders Merchants Federation said: “Merchants already face significant cost increases due to rising world prices and currency fluctuations involving Sterling. Paying 20% more due to VAT rules will hit builders merchants hard”.

About Fiona Russell-Horne

Fiona Russell-Horne
Editor-in-Chief across the BMJ portfolio.

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