Members of the Insulation Industry Forum have written to Energy Secretary Ed Davey highlighting fears that loft,wall and cavity insulation markets face drops of up to 87.5%.
The predicted falls come from the gap between the ending of existing subsidy schemes and the introduction of the Green Deal.
The Forum fears that the closure of loft and cavity wall insulation manufacturing plants and installation contractors going out of business could see employment levels fall by 45% from 36,000 to 20,000 next year.
Insulation Industry Forum spokesperson John Sinfield of Knauf Insulation 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.
“It will result in a lack of continuity of work from 1st January 2013 and dramatically fewer insulation installations in 2013 – we predict 16,000 job losses, many of them before Christmas.
“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”.