Insider Media Limited

The Federation of Master Builders has criticised the government's decision to raise VAT in January, claiming it will result in the loss of 7,500 jobs in the construction sector.

John Watson, regional director for FMB Midlands, told Insider the government's drive for energy-efficient homes - the Green Deal - could also be threatened by the VAT rise.

“The timing of the VAT increase to 20 per cent in January next year couldn’t be worse for construction," said Watson.

"The government wants to create jobs in the private sector but the VAT rise will have the opposite effect.

"Independent research on VAT shows that the £45.5bn a year domestic renovation maintenance and improvement market will fall by 2 per cent or £910m as a direct impact of the VAT increase which will result in 7,500 jobs being lost from construction."

The FMB, which is the largest trade association in the UK building industry, said the VAT rise will also impact on the government's proposed Green Deal. Announced by energy secretary Chris Huhne, the initiative is intended to support the implementation of energy efficiency measures to households and businesses without the government needing to meet any upfront costs.

Watson said: “The government is also set to release details of its Green Deal shortly but this too could fall victim to VAT increase. Green Deal aims to make the UK’s 26 million existing homes energy efficient over the next 20 years but with 25,000 homes needing to be refurbished every week, in order to meet the target, the government must drive job creation in the construction industry so that the skills are available when the Green Deal starts.”

The UK's housing stock is responsible for approximately one quarter of the country's carbon emissions, with the heating for non-domestic building accounting for about a further tenth.