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02 Mar 20212 minute read

ECA backs ‘Cut the VAT’ campaign

ECA backs ‘Cut the VAT’ campaign

ECA has added its backing to the Cut the VAT campaign, led by the Federation of Master Builders (FMB) and the Royal Institution of Chartered Surveyors (RICS).

According to new research published by FMB and RICS, a VAT cut on home improvement works from 20% to 5% for a temporary five year period would generate an economic stimulus worth £51 billion and create 345,000 new jobs.

Analysis conducted on behalf of the FMB and RICS by CBI Economics has found that cutting VAT on Repair, Maintenance, and Improvement (RMI) activity for the period 2021 – 2025 would lead to:

  • £51 billion total additional output in the construction sector and wider economy
  • £25 billion additional Gross Value Added (GVA) across the economy
  • 345,000 additional full-time equivalent jobs in construction and beyond.

This would cost the Government £2.8 billion in lower overall fiscal contributions.

In 2021 alone, the benefits are likely to include:

  • £9.5 billion economic stimulus
  • £4.6 billion in additional GVA
  • 64,000 jobs.

The FMB and RICS have called on the Chancellor to use the Spring Budget to make this change. In backing builders and the professional services working in repair and maintenance, the Government would be supporting a sector that is still grappling with the effects of skills and materials shortages made worse by the pandemic and Brexit. 

Brian Berry, Chief Executive of the Federation of Master Builders (FMB) said:

“If the Chancellor really wants to level up across the country, cutting VAT on home improvements is a win-win, as this research shows. A temporary tax cut will give a much needed boost to small building firms, and unlock additional cash for households to spend on repairs and energy efficiency measures. A measure that the FMB has been calling for, for many years. It will also help the struggling Green Homes Grant scheme, as we know that homeowners are more likely to install green measures as part of wider home improvement works.”            

He concluded: “If we don’t make energy efficiency upgrades more accessible and easier to deliver, the Government will fail to meet its net zero targets. Cutting VAT and government grants are measures that should be brought together under the umbrella of a National Retrofit Strategy that sets a clear direction of travel for both businesses and consumers.”