Increasing Fuel Duty Would Harm Growth and Drive Up Prices, Logistics UK Warns

Removing the five pence per litre cut in fuel duty could drive inflationary cost pressures, raising prices for businesses and consumers, according to a submission made by business group Logistics UK to the Treasury ahead of the autumn Budget on 30 October.

The business group, which is one of the UK’s largest and only trade body representing all logistics, outlined its concerns that increasing costs for industry would apply the handbrake to economic growth while driving up the price of everyday goods. It also said that higher costs for the sector could inhibit its ability to continue investing in its decarbonisation.

The extension to the five pence per litre cut in fuel duty is set to end in March 2025 and Logistics UK’s submission calls for the cut to be maintained for a further year. According to Logistics UK analysis, a 1p increase in fuel duty would cost haulage businesses across the UK over £185 million per year.

Logistics UK Chief Executive David Wells OBE said, “The logistics sector underpins all other sectors and has a critical role to play in driving growth and the new government’s industrial strategy, so now is not the time to increase costs for logistics businesses. With hauliers operating on low margins, typically around 2.5%, often the only sustainable way to manage cost increases is to pass them on through the supply chain with consumers, ultimately, picking up the tab in higher prices. This is something our members are loath to do but will have no choice when they are also managing rising wage costs and new vehicle prices, while investing in new equipment to take us into a net zero future.

“We recognise the constrained fiscal situation facing the Chancellor and are confident that the best way that our sector can help the government manage it is by driving growth, growth that would be stifled by tax increases.”

According to Logistics UK, fuel represents a third of the costs for logistics businesses and the weekly fuel bill for a 44-tonne diesel HGV is estimated to be approximately £888 with £436 taken in fuel duty by HMRC. The trade body’s submission highlights that logistics businesses paid £5.84 billion in fuel duty in 2021, contributing more than 20% of all fuel duty paid to HMRC.

Wells added, “In the medium term, we are calling for a move to a dynamic mechanism for fuel duty that, in periods of inflation, enables the Treasury to keep fuel duty down by taking into account its tax receipts from VAT on fuel. We also want the government to better align road and rail charges, to enable rail freight to be cost competitive.

“For the long-term, we are keen to work with the government to help develop plans for the future of transport pricing that ensure it works for the logistics sector and wider economy. Any new pricing system must recognise that logistics works as an integrated system across transport modes and operators must be able to make rational decisions to move goods in the most productive, strategic and green way.”

The call to maintain the current fuel duty cut is one of several measures outlined by Logistics UK in its submission to the Treasury. Logistics UK has set out five priority areas for unlocking economic growth, which include creating a closer partnership between the government and logistics sector; developing innovative and integrated infrastructure; ensuring a fair transition to becoming a clean energy superpower that rebuilds the UK’s industrial strength; creating a skills partnership to support a thriving sector; and backing trade as a driver of innovation and productivity.

Logistics UK is one of the UK’s leading business groups, representing logistics businesses which are vital to keeping the UK trading, and more than seven million people directly employed in the making, selling and moving of goods. With decarbonisation, Brexit, new technology and other disruptive forces driving change in the way goods move across borders and through the supply chain, logistics has never been more important to UK plc. Logistics UK supports, shapes and stands up for safe and efficient logistics, and is the only business group which represents the whole industry, with members from the road, rail, sea and air industries, as well as the buyers of freight services such as retailers and manufacturers whose businesses depend on the efficient movement of goods. For more information about the organisation and its work, please visit logistics.org.uk     

Transport & Logistics – Driving The Industry Forward