The Builders Merchants Federation (BMF) has warned that if its members will need to pay an extra 20% VAT on European construction materials after Brexit, they could face a bill of £1bn.

This week, Parliament voted to stop the UK raising taxes bound for the EU if the EU does not agree to collect taxes for the UK. If the Brexit goes through without a deal in place, then there will be no reciprocal customs arrangements, meaning that businesses may have to pay an additional 20% VAT on goods imported from the EU. To add to this headache, they would have to pay this added VAT before the goods could leave EU ports.

According to BMF, building supplies will be particularly hard-hit, and this additional cost will impact on construction sites in London and across the country and may affect the housing market. Costs, prices and cashflow will all suffer, as the UK relies heavily on imported materials such as bricks, timber and paint.

For example, 60% of all timber used in the UK construction industry mainly comes from the EU nations of Finland, Sweden and Latvia, which would increase costs by £1bn. Bricks mainly import from Holland and Belgium, which would add costs of £160m. Paint comes from across the EU, and the estimated costs for it would be roughly £80m.

John Newcomb, BMF’s Chief Executive, said: “Merchants already face significant cost increases due to rising world prices and currency fluctuations involving sterling. Paying 20% more due to VAT rules will hit builders’ merchants hard.”