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VAT hike cost builder jobs, says FMB

More than one in five small building firms have been forced to cut jobs as a direct result of last year’s VAT increase to 20%.
That’s according to the Federation of Master Builder’s (FMB) latest State of Trade Survey, which also found that more than half of them reported falling workloads as a consequence of the VAT hike.

Brian Berry, director of External Affairs at the FMB says: “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.”

He continues: “More than 200,000 construction jobs have been lost since 2008 when the UK economy was hit by recession. 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.”

Berry argues 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 £1.7 billion and create 34,400 jobs by the end of 2012.

“Such a cut could also release £374 million 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.”

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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