The Government needs to think more carefully about the powers it has to stimulate job creation in the construction industry, says the Federation of Master Builders (FMB) in response to last week's official employment figures which revealed that the construction industry lost 24,000 jobs in the first three months of 2011.

Richard Diment, Director General of the FMB said: "Across the UK our members are telling us the market is the toughest they have ever known it. According to our latest independent State of Trade Survey 35% of members expect to see workloads fall again in the second quarter of 2011. This is against a background of the International Monetary Fund having downgraded the UK economy's growth prospects and the banks having failed to meet their lending targets to small businesses under the Government's 'Project Merlin'. All of this points to a painfully slow recovery for small construction companies who remain very concerned that households will continue to put moving house or having home improvements on hold due to their own financial worries."

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Mr Diment continued: "The Government has the power to put money back in the hands of homeowners and landlords by allowing a reduced rate of VAT on all home repair, maintenance and improvement work. Research commissioned last year by the Cut the VAT Coalition shows a cut in VAT to 5% on this type of work has the potential to create tens of thousands of jobs over the next decade. We also know from additional analysis of the Office of National Statistics construction output figures published last week that the output of construction SMEs decreased twice as much as the output from bigger companies at the start of the year. This is particularly worrying when 93.5% of Britain's private contractors employ fewer than 14 people."

He concluded: "All of the figures go to show the Government simply cannot afford to take its eye off the issue. When members responded to our last State of Trade Survey in March, 43% had reduced employment levels in the first three months of 2011. Forthcoming survey results for the second quarter of 2011 are expected to reveal whether or not there has been any improvement following this miserable start to the year. Unfortunately, we suspect there is still a very long way to go to repair the damage done by the downturn and we now urge the Government to consider the economic case for a targeted VAT cut as a matter of urgency."

(CD)