In an open letter led by Family Business UK, the trade associations warn that changes to business property relief (BPR) and agricultural property relief (APR) will starve their members and the economy of investment, lead to forced, premature business sales and result in job losses across the country.

Six construction industry trade associations—the Builders Merchants Federation, British Coatings Federation, Construction Plant-Hire Association, Electrical Contractors Association, Home Builders Federation, and Commercial Interiors UK—are signatories to the letter.

Economic modelling commissioned by Family Business UK and conducted by CBI Economics suggests that, far from raising revenue, the changes to BPR alone could result in a £1.25bn net fiscal loss to the Exchequer, more than 125,000 job losses, and a reduction in economic activity (GVA) by £9.4bn throughout this parliament.

The budget announced changes to BPR and APR, which mean that business and farm assets worth more than £1m will now be subject to a 20% inheritance tax when the business owner dies.

Family business owners and farmers typically retain more than 90% of their wealth directly, allocated to fund growth and investment.

To cover the inheritance tax liability, business owners will be forced to take money out of the business otherwise allocated to investment, typically via dividends (taxed at 39.5%). Added to IHT, this effectively creates double taxation, Family Business UK argues.

Builders Merchants Federation chief executive John Newcomb explained why his organisation had added its name to the letter.

“Merchants have existed for hundreds of years, and the overwhelming majority are family-owned, small local independents. 75% of our members have an annual turnover of less than £12.5m.

“They want to pass their businesses onto the next generation to continue to serve their loyal customers and local communities. But the changes the chancellor announced in October do not encourage that, in fact, quite the opposite,” he said.