A 2.5 percentage point cut in VAT, the acceleration of capital spending projects and moves to improve the supply of mortgages are all welcome announcements in the pre-budget report, says the British Woodworking Federation (BWF).
Chancellor Alistair Darling told the House of Commons that the VAT reduction from 17.5% to 15% would be effective from next Monday and last until the end of 2009.
He also said a detailed scheme for improving the supply of mortgages was being worked on for next spring’s budget, while £3bn of capital spending from 2010/11 was being borught forward and £1bn was being pumped into a temporary small business finance scheme.
BWF chief executive Richard Lambert welcomed the news, especially the VAT cut and mortgage supply initiative.
“I think reducing VAT can help businesses’ cashflow. In these times cashflow is a really critical issue for many companies.”
He praised the news on capital spending but said it was one thing to bring forward a project and another to actually implement it.
Mr Lambert said the economic malaise had stemmed from the drying up of available mortgages. “Until that supply comes back again we will see continued depression in the volume housebuilders. Only when the national housebuilders start building again will the joinery sector benefit.”
The chancellor also announced a growth forecast of 0.75% for the whole of 2008, with output continuing to fall for the first half of 2009. Economic growth in 2009 is forecast to between -0.75% and -1.25%.
An increase in fuel duty will partially offset the VAT reduction, while £100m is being provided to help households improve insulation.
