A hike to fuel duty in the upcoming Budget would impact logistics sector growth, according to a major business group.
Chancellor Rachel Reeves is reportedly weighing up plans to reverse the 5p-a-litre cut introduced by Rishi Sunak in 2022 and possibly realign fuel duty with inflation as the Government tries to find ways to plug a multi-billion-pound black hole in public finances.
Logistics UK is urging Reeves to protect the current rate of fuel duty to ensure that the industry can play its part in driving economic recovery while also continuing work to decarbonise the sector.
Policy director Kevin Green warned: “Fuel is the largest single expense that logistics businesses have to bear and the current rate of fuel duty is enabling the industry to start planning for a decarbonised future.
“With the sector already operating on extremely narrow margins – often only 2.5% – increasing fuel duty would heap the cost pressure on operators. This would not leave enough spare cash for our industry to implement the necessary steps to take us into a net zero future without passing on the cost to the end customer, something our members are loath to do.
“With wage costs and the price of new vehicles rising, pressure on the logistics industry continues to mount, at a time when the sector is committed to helping kickstart economic recovery and growth. Rather than stifle the increased economic activity which our industry is able to drive, we need Ms Reeves to consider other alternatives to fill the fiscal gap.”
Logistics UK has also warned that increasing fuel tax would be a “double whammy” to millions of car drivers, who would not only pay more for their journeys, but also more for everyday products, as the logistics industry would have little choice but to pass increased fuel costs on to consumers.
“Nothing moves without logistics and our sector is a key driver for growth and productivity,” continued Green. “We have a great opportunity to help kickstart the economy but this opportunity will be stifled if logistics businesses cannot create profit to invest in the future of the sector.”
