More than 1,600 jobs in the West Midlands are under threat amid warnings the insulation industry is about to "fall off a cliff" because of delays to environmental legislation.

The Insulation Industry Forum (IIF), which represents more than 70 per cent of the UK's s700 million insulation industry, claims the sector will suffer catastrophic job losses in 2013.

It blames the gap between the end of the current subsidy scheme in December and the start of the new incentives, under the Government's Green Deal and Energy Company Obligation (ECO), becoming fully functional at the end of January.

Both new schemes were due to launch in October, but ECO - which will oblige energy suppliers to improve households' energy efficiency - has been delayed.

Up to 25 employees are facing the axe at the Smethwick base of national company A&M Insulation, which has an estimated turnover of s35 million this year.

Managing director Ross Laing said: "The Government's plans for implementation of the Green Deal and ECO will have a disastrous impact on my business unless the Government urgently introduces transitional measures.

"This will hit us hard at exactly the time of the year when people are feeling the chill.

"Without the Government recognising the scale of the problem that is about to hit the insulation industry, there will be dire consequences for our business."

As a result of the hiatus between the two support regimes, the IIF predicts that 16,000 jobs, including 1,600 in the West Midlands, will be lost, accounting for 45 per cent of the total. The Green Deal, where householders will sign up for efficiency measures paid for through savings on their bills, is now subject to a "phased" launch, with customers only signing up from early next year.

Insulation groups fear they will only start to see revenues from the new schemes in the second half of next year and claim it is "critical" that the Government address this gap.

The hiatus will impact on the continuity of cavity wall, loft insulation and solid wall work jobs undertaken from January 1, IIF said.

IIF expects 45 per cent of jobs will go in the loft and cavity installation and distribution sectors between now and the end of 2013.

"The new scheme won't be as successful as the scheme it's taking over from," Mr Laing said.

"We started a redundancy process. The die is cast."

The IIF said the Government's own figures indicate that there will be an 87.5 per cent reduction in the loft insulation market, a 57 per cent reduction in the cavity wall insulation market and a 16 per cent drop in the solid wall insulation market.

Funding for home insulation is provided by the energy companies through payments taken from consumer bills of about s1.6 billion a year.

On behalf of the IIF, Knauf Insulation managing director John Sinfield said: "The loft and cavity wall insulation installation industry will fall off a cliff in 2013.

"The policy by the current government risks destroying businesses, putting 16,000 people out of work and undermining the coalition's green ambitions for the country."

"We are calling on the secretary of state to recognise the scale of the problem that is about to hit our industry and develop a set of measures to address the insulation gap and implement a suitable solution."