SCOTTISH homeowners are delaying £876 million of building work every year because they cannot find a builder they trust, the Federation of Master Builders (FMB) has warned ahead of next week’s budget.
The figure is Scotland’s share of £11.2 billion of work delayed across the UK annually, according to research by the FMB and the HomeOwners Alliance, which found one in five homeowners have put off work in the last five years because they could not find a trusted or quality builder.
The FMB is urging the chancellor to reform VAT relief for housing improvement work in an effort to stimulate demand. VAT is set at Westminster, so the upcoming budget applies directly to Scottish homeowners. Domestic electricity has been VAT-free since 1 October, but VAT remains at 20% on the labour for general home improvement work, with the exception of some energy efficiency installations which are charged at 0% VAT, but this is set to end in March next year.
Mark Macdonald, director of O’Mac Construction in Stornoway on the Isle of Lewis, said, “Eight out of ten tender returns are coming in above budget and end up shelved or redesigned. That wastes a massive amount of resources and frustrates everyone involved. On community-led projects, where funding is tight, VAT is a constant battle, and removing it would help some of those projects move forward.
“Reversing the employer National Insurance rise and properly backing firms who take on apprentices would give us half a chance of making a profit on our fixed-price contracts. If no help comes to the industry, contracts and jobs are at risk as costs keep climbing. If it wasn’t for the chronic skills shortage, we wouldn’t be taking apprentices on at all.”
The FMB said the chancellor has the chance to simplify and extend VAT relief on home improvements, beyond energy-efficiency measures. Energy efficiency installations are often coupled with general household upgrades, leaving a ‘complex’ invoice trail for builders to work out what is exempt from VAT and what isn’t.
Gordon Nelson, FMB Scotland director, added, “Homeowners across Scotland want to make their homes warmer, safer and fit for the future, but too many are being held back. Nearly £900 million of work a year is not happening in Scotland because people cannot find a builder they trust.
“Our tax system should encourage, not discourage, investment in energy efficiency. Reforming and simplifying VAT relief for housing improvement work will stimulate demand across all four nations of the UK. As we argue in our Builders’ Manifesto for Scotland, and with the chancellor promising to shift spending to the nations and regions, funding should be targeted at helping employers recruit and train apprentices.
“We look forward to the Scottish budget in December, where we expect more detail on how the Apprenticeship Accelerator Grant will help local builders train the next generation of master builders.”
VAT relief is one of five measures the FMB is calling for in this budget. The others are: a UK-wide network of Build Academies and administrative support for small firms taking on apprentices; faster planning for small housebuilding companies; development finance that small housebuilders can easily access; and funding for mandatory licensing of domestic building companies.
