VAT increase will lead to 45,000 job losses

THERE are fears that the new year's VAT rise could lead to the loss of 11,400 jobs in construction over the next decade.

The Federation of Master Builders (FMB) is worried that the rise in VAT from 17.5 per cent to 20 per cent will also lead to a further 34,000 jobs going in the economy as a whole by 2019.

The concerns follow in the wake of claims made by construction companies last month that 100,000 jobs could go in the sector as a result of government cuts to funding for building new schools, hospitals and public sector offices.

The UK building industry is already believed to be in the grip of its worst slowdown for three decades.

The FMB says that the job losses also mean that homeowners will be more vulnerable to rogue traders who will flood the market.

Brian Berry, director of external affairs at the FMB, 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 per cent decrease in demand for domestic repair, maintenance and improvement 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."

He added: "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.

"Homeowners will also be badly affected as many might be tempted to use a rogue trader claiming they can make VAT disappear.

"However, rather than saving 20 per cent, many homeowners will lose their money either through shoddy work or the trader running off with a deposit and doing no work at all."

The FMB believes that selective reduction of VAT could be the answer.

Mr Berry said: "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."

The FMB represents around 11,000 building companies. Established in 1941 it protects the interests of small and medium-sized building firms,

Stephen Blake of the CMA  Photo: Vikki Ellis

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