Wednesday 11th January 2012 – FOR IMMEDIATE RELEASE
More than one in five small building firms report being forced to cut jobs as a direct result of last year’s VAT increase to 20%. In addition, more than half of these small businesses reported falling workloads as a consequence of the VAT hike. These are the findings from the Federation of Master Builder’s (FMB) latest State of Trade Survey, the only independent quarterly survey of economic conditions for small and medium-sized construction firms operating predominantly but not exclusively in the domestic repair, maintenance and improvement sector.
Brian Berry, Director of External Affairs at the FMB 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."
“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.”
"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 £161 million 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.”
Cut the VAT Campaign
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% to help grow the UK economy. Since work began, the EU has changed the law to allow member states to permanently reduce VAT to 5% in this area in order to support economic growth. Support for the campaign now extends to nearly 60 different organisations.
For more information please visit: www.cutthevat.co.uk