After the UK government’s new Net Zero Review called for more consistent use of incentives to help businesses go green, Logistics UK is raising concerns about the impact of reduced energy bill support for businesses and the risk that a steep rise in fuel duty this spring could place on green investment.
The government recently announced that its Energy Bills Relief Scheme (EBRF) will be replaced by a new scheme, the Energy Bills Discount Scheme (EBDS), which will limit the amount of support it provides to businesses in the future.
From April 1 2023 businesses will receive an automatic discount of up to £6.97 per megawatt hour if wholesale prices exceed £107 per megawatt hour for gas, and up to £19.61 per megawatt hour if wholesale prices exceed £302 per megawatt hour for electricity. No discount will be applied below those thresholds.
Responding to the news that the sector’s future energy bills could be impacted by a less than favourable discounted rate when the current energy bill scheme is curtailed, Kate Jennings, the organisation’s policy director, has urged government to use its upcoming Spring Budget to recognise the role the sector plays in driving every part of UK PLC. Speaking today, she stressed that government should consider the potential impact of above-inflation energy and fuel price rises on businesses and consumers.
“Logistics is at the heart of every sector of the UK’s economy,” she comments, “providing the materials required to drive businesses from manufacturing to hospitality. Our industry is already facing substantial financial pressures from inflation and the prospect of a rise in fuel duty this spring. Further, above-inflation, price increases on energy bills would divert funds our industry needs to invest in the new technology required to transition to a zero-carbon operating model and stifle growth opportunities across the sector.
“Members have already reported costs of over £1 million for upgrading power supplies to one depot to enable electric vehicle recharging – adding additional costs at this time will stall the transition to greener technologies across the board.”
In November 2022, Logistics UK raised concerns about a potential 23% increase in fuel duty from Spring 2023, following the publication of the Office of Budgetary Responsibility (OBR) Report on Fiscal Responsibility on the day of the Autumn Statement. The business group is calling for the introduction of a dynamic mechanism to reduce fuel duty while maintaining revenue levels through VAT and other sources, to ensure government keeps control of the public purse and, at the same time, to enable businesses to plan for the future more efficiently.
“Our members’ work impacts every single individual and business in the country,” continued Ms Jennings, “as they work round-the-clock to deliver what the nation needs on tight schedules and budgets. Increasing the costs of energy and fuel at this point would have a detrimental effect on the logistics industry’s ability to power the nation’s recovery after the pandemic, as well as enabling our members to prepare for a greener future.
“The current energy bill scheme, capping the unit cost of gas and electricity for all businesses, provided much-needed certainty for our members, particularly SMEs who make up 99% of the logistics sector. However, the significantly lower discounts to be applied to eligible businesses from the new scheme from 1 April 2023 will be detrimental to further growth and investment for the future, and could even result in business closures.
“For the sake of the economy, and the logistics industry in particular, Logistics UK is urging government to use its Spring Budget to put forward a package of support that ensures our members can keep the lights on, operations moving and UK businesses trading, while continuing to invest in a greener future.”
The decision to cut support to businesses is a major blow for hauliers, coach and van operators, the Road Haulage Association (RHA) said.
“For struggling firms who have seen their energy bills skyrocket the current scheme provides certainty and for many has made a difference. This new scheme will do neither,” it said.
Richard Smith, RHA Managing Director, added: “As we saw during the pandemic the transport sector is essential to keeping the UK economy moving. It is critical to the country’s supply chains transporting 89% of all goods moved by land in the UK, including 98% of food, agricultural and consumer products.
“Many operators may not be able to survive on the insignificant support through the new version of the scheme. Two pence off a kWh of electricity and half a pence off gas is totally insignificant for small businesses.”
In November 2022, RHA surveyed its members on the impact of the energy price crisis to feed into the Government’s review of the Energy Bill Relief Scheme. Nearly half of those responding reported that their bills compared to last year have increased by between 300-400% with the remainder reporting average increases of 130%.
The majority of these costs come from warehousing and storage, where efficiencies have already been fully exploited through more efficient lighting/heating and timing switches. Importantly, the amount of energy consumed in these activities will not reduce in line with reduced economic activity.
The most common response of transport businesses was to raise prices, RHA said. Hauliers have increased their prices by an average of 5-10% over the past year. This demonstrates the link between energy bills and the high levels of consumer inflation that we see at the moment.
Reports from RHA members show that while businesses have been able to raise prices, the vast majority have not been able to raise them sufficiently to pass on the energy price increases in full.
For more details on the new scheme, visit: https://www.gov.uk/guidance/energy-bills-discount-scheme