Cut VAT to reduce emissions from construction, says report

The government must cut VAT and focus on digital technology to reduce emissions from the construction industry, says think tank. 

According to a report published late last month by think tank Green Alliance, the productivity of the construction industry has hardly improved in the last 25 years.

The construction of UK buildings is responsible for 36Mt of carbon per year. This is equivalent to the emissions generated by half of all cars on UK roads each year.

In order to reduce these emissions, the authors of the report have outlined steps that the government should take in order to ensure that the construction industry meets the UK’s legally binding net-zero targets.

According to the report by upgrading and repurposing old buildings rather than demolishing them, it will reduce the impact of embodied carbon. Embodied carbon is the carbon footprint of a material. It considers how many greenhouse gases (GHGs) are released throughout the supply chain

Currently, new buildings benefit from zero rate VAT, whereas repair and renovation work has a 20% VAT. The authors have argued that this limits the renovation of existing buildings and instead encourages demolition and new build which has a higher carbon footprint.

The authors have also suggested that by promoting digitally-enabled retrofits it would help to boost the construction sector’s low productivity levels and would also create the need for more highly skilled jobs.

According to the report, modular off-site retrofit solutions can achieve up to 75% higher productivity levels compared to conventional construction methods. Therefore the report states that the government should establish a dedicated programme to develop and scale up digitally-enabled whole building retrofit approaches.

Caterina Brandmayr, a senior policy analyst at Green Alliance, said: ‘As the UK looks to build back better post-COVID, businesses should be investing in those smart low carbon supply chains that will be in high demand in the future and shield the sector from further disruptions down the line.

‘To make this a reality, the government should start by removing the tax disincentives that are stopping the renovation and repair of existing buildings, and scale up deep retrofit solutions that will create high skilled jobs across the country.’

Rodney Turtle, VP for public policy and government affairs at Schneider Electric, said: ‘Made with valuable resources and shaping the fabric of communities, the UK’s existing buildings are assets that should not only be conserved but upgraded for a net-zero future.

‘Doing so, with the help of novel digital technologies, is a prime opportunity to revitalise the construction industry after the current crisis.’

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