In response to today’s Spring Budget, business group Logistics UK said it was delighted that the 5ppl fuel duty cut originally introduced in March 2022 is to be retained for a further 12 months.
Commenting, Chief Executive David Wells said: “Logistics is the UK’s system for growth and today’s budget announcement was an opportunity for the Chancellor to ensure continued – and potentially increased – investment in green growth and fulfilling careers, while keeping prices down in the shops.
“Today’s announcement that the 5ppl cut in fuel duty is to be retained for a further 12 months is very welcome news for logistics businesses, particularly SMEs – who make up 99% of the industry, and traditionally operate on low margins. Logistics UK has consistently urged government to extend this cut, while maintaining revenue levels through VAT and other sources.
“Logistics is at the heart of every sector of the economy; this decision recognises the importance of managing logistics costs to avoid further inflationary pressures on business and consumers. This should help to ensure businesses have the funds to invest in productivity, growth and greener technologies, alongside the new policy for full capital expenditure announced as the successor to the super-deduction (providing it encourages the transition to a zero-carbon economy).
“However, Logistics UK is dismayed by the lack of support to help businesses with energy costs and our sector’s transition to a low carbon economy, something which the government has urged industry to commit to. This is a missed opportunity."
Wells continued:"Our members will also be concerned about proposals for a reformed HGV road user levy and together we will be seeking urgent clarification as to the detail involved.
“While we are also disappointed there was no reference to much-needed Apprenticeship Levy reform, it is encouraging that government is focused on supporting people into work, which will help to relieve the existing skills gaps in industry and the wider UK economy. Logistics UK will work with its members to scrutinise the detail and identify what these measures will entail, such as the announcement of skills bootcamps and Returnerships, and whether these will provide a credible pathway into logistics.”
The Road Haulage Association’s Director of Public Affairs & Policy, Declan Pang, said: “We are pleased the Chancellor has listened to the RHA and continued the fuel duty freeze and maintained the 5p per litre cut brought in 12 months ago. This is something we’ve campaigned for to help reduce costs and control inflation.
“The continued freeze on Vehicle Excise Duty (VED) for HGVs for 2023-24 is welcome news and another much needed win for RHA members following our engagement with government.
“However, today’s Budget could have gone much further to support hauliers, coach operators and the logistics industry.
“We are disappointed to see the increase in corporation tax from 1 April as well as the return of the HGV levy from August this year. This is a tax targeted at the road freight industry that economic growth in the UK relies upon.
“We are also concerned that the focus of the HGV levy has been shifted towards CO2 emissions. The original intention of the levy was to ensure overseas operators contributed to the upkeep of the UK road infrastructure. If this is no longer the main purpose of the levy, we question its utility at all, given the progress the industry has already made in reducing carbon emissions. The lowering amounts of levy funds recouped as fleets modernise will also need to be addressed.
“The first-year capital allowance for investment in plant and machinery is welcome and we support the measures on encouraging the over 50s back to work through additional skills bootcamps and Returnerships. As the average age of an HGV driver is 52, we already know the benefits they bring to the workforce. We would have liked to have seen more Government efforts into recruiting younger people behind the wheels of trucks and coaches.
“Almost everything we use and consume comes on the back of a lorry. This country’s growth depends on an effective logistics network.”
Simon Hobbs, Chief Executive of Macclesfield-based logistics group Kinaxia, said: “The Office for Budget Responsibility’s forecasts about the UK not technically entering a recession and inflation more than halving by the end of 2023 are pleasing, but our logistics industry has seen volumes drop off in the first quarter of 2023.
“This drop-off is temporarily concealing the fact that our sector still faces a labour skills shortage in both its driver and warehouse populations. So, the support in childcare costs will hopefully encourage some new full-time or part-time entrants to our industry, as may the new ‘returnerships’ programme for over-50s. It’s equally as pleasing to see some support given to those with disabilities.
“The huge increase in corporation tax has been partly and temporarily reduced by the ability to offset investments, but the detail behind this is yet to be seen. The fuel duty freeze is a help to our customers, and hopefully the extension of the energy price cap may encourage people to spend a bit more as we enter warmer months – but there wasn’t much in the Budget to restore consumer confidence.
“At least the continual and costly deterioration of our roads was recognised with the increase of £200m in pothole repairs. Overall, not much there to help our logistics sector.”
David Bushnell, Director of Consultancy and Strategy, Fleet Operations: ““The Treasury is contending with considerable economic challenges. Pressure to keep a tight grip on the UK fiscal environment combines with a need to help consumers and businesses navigate the cost-of-living squeeze. Add government sustainability targets into the mix and the Chancellor faced a tough balancing act with his Spring Budget.
“For fleets, the decision to freeze fuel duty and retain the 5p reduction for a further year comes as welcome news for operators struggling with a burgeoning cost crisis. Pump prices may have fallen back from their 2022 summer peak, but they remain markedly higher than in recent years. Margins, consequently, continue to be hit hard.
“The move, however, will not be well received by those looking to accelerate transport electrification. Environmentalists will be buoyed by a pledge of up to £20 billion to support carbon capture, but the lack of any significant new measures to further incentivise electric vehicle (EV) adoption and infrastructure roll out signals a missed opportunity.
“EV adoption remains in its infancy and with high energy costs continuing to impact drivers reliant on public charging networks, more must be done to achieve a timely transition to net zero transport. Cutting the public charging VAT rate, to match the rate for domestic electricity, would have been a good place to start.”
“Elsewhere, fleets buying vans and trucks will benefit from a new policy of ‘full expensing’ but the importance of leasing as an integral ingredient to cost-efficient fleet operations remains unrecognised. It is disappointing that the industry’s call for a super deduction to cover leased assets has been ignored.”
ParcelHero’s Head of Consumer Research, David Jinks, said: ‘From starting with the surprise news that the Office for Budget Responsibility (OBR) believes the UK economy won’t now go into recession (though it will contract by 0.2% this year), this wasn’t quite the big snooze that many pundits had been predicting.
“Perhaps the most interesting news for manufacturers and other businesses was the (admittedly widely trailed) announcement of 12 new Enterprise Zones. These could create new Docklands-style developments across the UK, according to the Chancellor. They will be introduced in the West Midlands, Greater Manchester, the North East, South Yorkshire, West Yorkshire, East Midlands, Teesside and Liverpool, as well as Scotland, Wales and Northern Ireland. Each will be funded by £80m over the next five years. The Enterprise Zones are expected to gain tax relief and business rates help, and bring together regional governments and local universities to boost R&D projects, etc.
“The really bad news for businesses was that the whopping climb in corporation tax, up from 19% to 25%, will go ahead as planned. However, its impact could be slightly offset by some other tax measures. This particularly applies to those companies investing in R&D, IT equipment, etc. Under Hunt’s “Full Expensing” plans, every pound a company spends on new IT equipment and new plants and machinery can immediately be deducted in full from taxable profits. Smaller businesses will also have an increased Annual Investment Allowance of up to £1m, meaning 99% of SME companies will be able to deduct the full value of all their investment from taxable profits.
“Transport and distribution companies could benefit from a new £8.8bn pot for sustainable transport initiatives across the regions. Many working drivers will be delighted by the news that there will be an extra £200m spent on filling in the UK’s thousands of potholes. The announcement that fuel duty will remain frozen and the 5p reduction will be maintained for another year will also be welcomed by many owner-drivers.
“Many transport and supply-chain companies wanted to see considerably stronger greener measures. While there were few initiatives to get Britain’s motorists switching to electric power, news of a new carbon capture scheme, backed up with £20bn in support, will be greatly welcomed. This could cut around 20-30m tonnes of CO2 per year by 2030.
“As well as being the “boring budget”, this was also expected to be the “back to work” budget. Retailers and other businesses will be pleased to see several measures around increased childcare that will help parents afford to return to employment. The launch of so-called “Returnaships” (apprenticeships for more mature workers, focussing on flexibility and previous experience) will also help boost the amount of people available to work.
“There was very little to wake up High Street retailers in this Budget, however, with no new moves to reduce business rates or boost other retail initiatives. However, High Street pubs and hospitality businesses will want to raise at least half a glass to the Chancellor for freezing the cost of a draught pint. From 1 August, the duty on draught drinks in pubs will be up to 11p lower than the duty in supermarkets.
“All in all, this was certainly no KamiKwazi budget, full of shock tax cuts. Perhaps solid but slightly dull is just what most UK businesses were looking for. However, retailers across the UK will want to see further support for our endangered High Streets in Budgets to come.”
Chancellor Jeremy Hunt’s Budget Speech is available here
The Spring Budget in full is available here
Picture by Rory Arnold / No 10 Downing Street