Press Release
Economy continues to slide following ten per cent fall in construction output
26 July 2012
Construction figures once again caused a drag on the UK economy with a ten per cent fall in quarter two year-on-year figures.
Output from construction fell by 5.2 per cent between the first and second quarters of 2012. This followed a previous decline of 4.9 per cent between Q4 2011 and Q1 2012. The economy as a whole fell by 0.7 per cent.
In quarterly surveys of its members, the NFB has seen demand and workloads falling steadily for the past two years and it is unlikely that the industry will return to growth until 2014.
Measures taken by the Government to stimulate growth and demand have either not had the level of success anticipated, such as Project Merlin for bank lending, or are still unproven, such as the UK Guarantees Scheme for major infrastructure projects. There are measures the Government could take that would trigger growth now.
If the Government were to reduce the standard rate of VAT to five per cent for home repairs and improvements, it would:
- boost the economy by around £1.7 billion in 2012, rising to over £20 billion by 2020;
- create 100,000 construction-related jobs by 2020;
- bring over 20,000 homes back into use every year.;
- make the government's Green Deal home improvement programme much more attractive to consumers by making their money go further.
A cut would also reduce the damaging effect of cash in hand payments to traders who are evading tax – a practice that costs the Treasury £9.3 billion each year.
Julia Evans, chief executive of the National Federation of Builders, said: "Over 5,000 construction businesses have gone out of business since 2010. At a time when the economy is stuck in recession, the simple, single action of reducing VAT on home repairs to five per cent could boost the economy by almost £2 billion and create over 26,000 construction jobs in 2012 alone – partly offsetting the 4,000 construction job losses caused by raising the rate of VAT to 20 per cent in January 2011."
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