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.

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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."

Mr Berry continued: "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."

(CD/GK)