Government loses potential for £15bn economic boost and job creation

The Government must cut VAT on home improvement works to 5% to boost jobs and stimulate the economy. This is in response to the PMI data, published today, which shows that staffing numbers across the construction sector were in decline.

According to independent research conducted on behalf of more than 60 organisations including the Federation of Master Builders (FMB) and Royal Institution of Chartered Surveyors (RICS), cutting VAT to 5% for the period 2015 to 2020 would have generated an economic stimulus of £15.1bn and 95,480 extra jobs.

Brian Berry, Chief Executive of the FMB, said: “The Government must prioritise measures that create jobs in every community, and that will tackle climate change. Cutting VAT is an oven-ready fiscal policy that will help to generate billions in economic stimulus and tens of thousands of jobs across the UK. Local builders train almost three quarters (71%) of the industry’s apprentices, so supporting the repair, maintenance and improvement sector will help industry to train, train, train as well as build, build, build. Cutting VAT will also help us decarbonise our homes, as we know households prefer to do this as part of larger home improvement works.”

Dr Patrice Cairns, RICS Policy Manager said: “There is an urgent need to improve the energy efficiency within the UK’s building stock and retrofitting provides this opportunity. As the UK continues to spend more time at home, for our work as well as leisure, the benefits of green home improvements will continue to gather momentum. Government must use this unique opportunity to work with the professional expertise of industry and implement a holistic approach to retrofitting that will achieve significant carbon savings, both operational and embodied.”

Dr Cairns continues: “As the government begins to think about a strategy for rebuilding the economy in the wake of the COVID-induced recession, committing to a more sustainable stock of housing provides an opportunity both to kickstart business activity and focus on the green agenda. Government endorsing our call to reduce the VAT regime for home repairs, maintenance and improvement work would be a swift step in the right direction. Although the incentive to encourage retrofitting will carry an initial cost, it will be at least in part offset by the benefits associated with job creation, which will be much needed in the wake of the likely rise in unemployment as the furlough scheme concludes. It will also provide tangible long-term rewards both for the wider economy and individual households.”