Business tax cuts were welcomed in the emergency budget but the full story of how timber sector companies will be impacted by government spending decisons will not be made clear until the autumn, warned British Woodworking Federation chief executive Richard Lambert.

“From a business perspective it’s not as difficult as people anticipated,” said Mr Lambert. “But every individual and every family will find there’s an impact on them.”

Chancellor George Osborne ordered an increase in the rate of VAT to 20% from January, a reduction in Corporation Tax by 1% in every year of the parliament from the current 28% and a 1% cut in Small Companies Tax to 20%.

“The VAT increase was so widely trailed,” added Mr Lambert. “That’s going to have an impact on the marginal decisions about what people buy.”

But, he said, despite a government promise not to make further cuts to capital spending, companies would have to wait until the spending review in the autumn to see which projects will stay or go.

However, reductions in Corporation Tax and Small Business Tax were welcome, he added.

“Everybody knew what was going to happen in the budget,” said Performance Window Group chairman Roy Wakeman. “It’s got to be done. We have to help this government put things right.”

“Demand [until now] has been driven by the public sector. A lot of contractors are changing the structure of their approach to the market place to take on more private work.”

But Mr Wakeman said he was optimistic about sale of timber products in the current market, backed by demand for better insulated houses, tighter regulations and government incentives for energy efficient products.

“There is a clear need to tackle the deficit,” said Timber Trade Federation chief executive John White.

“However, we’re very worried that premature action will halt the recovery. That is a judgement call. I would make the point again that capital expenditure on construction is an investment for the future that actually adds to the economy.”

The VAT rise was denounced by the Federation of Master Builders and Construction Products Association,

The FMB said the move would lead to 7,500 jobs lost in the SME construction sector this year.

The CPA had hoped the government might have tempered the VAT rise by updating and expanding the list of those products and solutions that will improve energy efficiency in people’s homes such as more efficient heating systems and double glazing.”

Mr Osborne also unveiled large public sector spending cuts – with all departments, excluding health and international development being cut by 25% over four years, with more details to follow in October.