A proposed hidden fuel duty rise of 23%, buried in yesterday’s Office of Budget Responsibility report but not announced by the Chancellor Jeremy Hunt in his speech, would be a “body blow for the logistics industry” if implemented, according to Logistics UK.
The business group was initially encouraged that the government has “prioritised stability for the economy after a period of volatility, which will help restore confidence for businesses” but said it was disappointed that some of the measures announced by the Chancellor could stifle the switch to greener energy.
Kate Jennings, the organisation’s Policy Director explained: “The government’s announcement of continued infrastructure investment for Northern Powerhouse Rail, the HS2 extension to Manchester and the East West Rail link is good news for logistics businesses looking to strengthen cross-country connections with their customers,” she says.
“However, the removal of Vehicle Excise Duty (VED) relief on vans is an unhelpful signal for millions of businesses at a time when they are being encouraged to move away from diesel.
“Most logistics operators work on very narrow margins, with vehicle acquisition schedules planned way in advance to minimise disruption to cash flow. At a time when operators are already facing increased operating costs, the additional tax imposition will create an additional burden: our sector needs more incentives to make the switch to alternative fuels, rather than barriers on the road to Net Zero.”
The Road Haulage Association said the Chancellor could have gone much further to reduce the costs of doing business and the upward trend in prices. Costs for road transport businesses have increased by over 11% in recent months with fuel alone up by nearly 40%, it said. These increased costs have a direct impact on the prices on our shelves, as businesses have little choice but to pass them on to the consumer.
Richard Smith, RHA Managing Director, said: “We were disappointed that no further action has been taken to reduce fuel duty which would ease the cost of living for everyone. We hope that our proposed Essential User Rebate, an anti-inflationary measure which will help ease fiscal pressures in the supply chain and reduce the rising cost of living for everyone, will be considered for the Spring Budget 2023.”
“Freezing the threshold for employer National Insurance will also increase costs of employment when costs for businesses are rising across the board.
“We welcome the energy support package for businesses until April, and the steps taken to assist businesses affected by the Business Rates revaluation, particularly the relief from rate increases as a result of property development. We will be working closely with the Government’s review of the Energy Bill Relief Scheme to ensure our industry’s critical role is properly considered and additional support maintained.
“We were also pleased to see the Chancellor’s commitment to infrastructure as a priority for growth, but we need a renewed focus on roads investment at all levels of government across the UK if we are going to keep British businesses and supply chains moving.”
Hunt also announced measures intended to address what he called the tax burden imbalance between online retailers and bricks and mortar sales. Total business rates paid by the retail sector are estimated to fall by 20%, but for large distribution warehouses business rates will rise by 27% which UKWA Chief Executive Clare Bottle branded as 'unfair':
She added: “The changes in business rates are intended to reflect the growth of the online sales sector, but not all warehouses are involved in ecommerce. What’s more, ecommerce is seeing a downturn since the end of the COVID lockdowns.
“Retail shops on the high street, who are seeing a fall in bills, will get the full reduction as a result of transition relief reforms. Online marketplace warehouses, on the other hand, will pay higher bills, because of the revaluation, even though our sector has seen bills go up, including increased wages, energy costs and equipment like MHE and racking. Warehousing is facing a disproportionate increase in business rates.
“The transitional relief is intended to make increases more manageable, with caps at 5%, 15% and 30% for small, medium and large properties. But most warehouses fall into the latter category... and therefore could still potentially be seeing up to 40% increases in their rates bills. The 30% cap is very high and not of huge benefit to most logistics properties. This is a big disappointment and simply not fair.”
On a more positive note, UKWA welcomed the Chancellor’s comments on the need for energy independence combined with energy efficiency – independence to ensure that the country is not at the mercy of international gas prices and the threat of energy blackmail, efficiency to reduce demand and climate impact.
Clare Bottle said: “Jeremy Hunt has declared that Britain is a global leader in renewable energy, with our renewable energy production growing faster than any other large country in Europe last year. Following our major report on the potential benefits to the UK (as well as to the logistics sector) of solar PV on warehouse rooftops, we are hopeful of pushing on an ‘open door’ to engage government in discussion on support for more businesses in embracing solar power.”
And while the Statement has gone some way to reverse the collapse in investor and consumer confidence created by the previous Chancellor's 'mini'Budget' in September, it was too little, too late, according to ecommerce expert ParcelHero.
Head of Consumer Research David Jinks said: ‘‘Retailers, manufacturers and their delivery and logistics partners have a lot to digest following the statement. Manufacturers may be heartened by the news that import tariffs are going to be reduced on some key component parts and that there will be a new initiative to make Britain “the next Silicon Valley”.
“Retailers will also give a cautious welcome to news of the transitional relief scheme for business rates. The £13.6bn business rates relief package will counter next April’s rise in the levy for thousands of companies. However, the ongoing business rates revaluation plans confirm that this outmoded and extremely costly tax will continue to strangle High Street businesses once any relief is withdrawn.
"Transport and logistics companies will welcome news that the capital expenditure budgets are to be maintained, and that HS2, Northern Powerhouse Rail and East-West Rail remain on track. The construction of HS2 will enable existing rail lines to increase freight services and get unnecessary lorryloads off UK roads.
"However, many logistics companies and couriers are committed to greening their fleets and reducing carbon emissions by introducing more electric vehicles to their fleets. It’s a shame that electric vehicles will no longer be exempt from vehicle excise duty from 2025. This means owners of electric vans will start to pay this tax and private motorists will be discouraged from making the same switch to electric power.
"The Chancellor was correct in saying that the lasting impact of Covid on our supply chains has made goods more expensive and that our recession was largely made in Russia. However, he underestimates the impact of the previous Chancellor’s now notorious mini-budget on small retailers. In saying he understands the motivation of his predecessor’s mini-budget in identifying growth as a priority, he whitewashes the costly harm it has done, dooming us to an Austerity Christmas.
"It's because of the previous mini-budget that retailers are unable to offer juicy discounts to tempt shoppers into spending more. Many traders were ordering their Christmas stock just as the notorious mini-budget prompted the pound to plummet against the dollar, the euro and the yen. Therefore, retailers paid significantly more for goods from the US, Europe and Japan than they did in 2021. Consequently, they now have less wiggle room for juicy Black Friday and Cyber Monday discounts to tempt shoppers. The damage has been done.”
Representing international exporters and traders, Marco Forgione, Director General of the Institute of Export and International Trade, said the Autumn Statement was a “step in the right direction” but will need detailed scrutiny: “The Chancellor addressed a number of the specific issues we raised around levelling-up, business support and investment. Having called for certainty for businesses during what is a very volatile economic cycle, I think today we got the first semblance of that.
“Nonetheless confirmation that the UK is now in recession is a cause of real concern to our members as was the analysis from the OBR that trade volumes are likely to decline over the medium-term.
"The removal of import tariffs on over 100 goods shows a commitment to supporting the manufacturing sector which we particularly welcome. The Chancellor also highlighted the export opportunities of nuclear energy. We will continue working closely with DIT, on behalf of our members, to showcase the wide range of export opportunities across the energy sector.
"Although the Overseas Direct Aid target has to remain at 0.5% for the forecast period, we ask the Chancellor to review this as soon as the fiscal situation allows, in order to return to the 0.7% target which is so important.
"Support announced today for the devolved administrations is also substantial and the Advanced Technology Research Centre in Wales will further heighten the UK’s specialism in technological development.
"We look forward to working with our partners in DIT and BEIS to support the Northern Ireland Trade and Investment Event also announced by the Chancellor today and driving new investment into Northern Ireland. Road infrastructure is also crucial for trade logistics, so we hope that the discussion between the Government and the Scottish Government on the A75 will be productive. We also call the Government to recognise, as part of its prioritisation of infrastructure modernisation, the need for the Single Trade Window project to continue being developed.
"As ever, these announcements will need detailed scrutiny. For example, there are SMEs throughout the country which may be questioning the ramifications of the announced cut in deduction rate for the SME R&D scheme to 86% and the credit rate to 10%.”