Industry reaction to budget
March 24th 2011 In a major result for the industry, the fuel duty cut has been calculated to save hauliers £1,500 per truck every year. Read on for the full industry reaction.
Simon Chapman, FTA chief economist
“This is a key win for FTA and will result in a fairer fuel deal for its members. Our primary goal coming into this Budget was to see the fuel duty rise in April scrapped and for a fairer deal for our members and all road users in difficult trading conditions. Clearly, Mr Osborne has listened to our concerns and recognises that for economic growth to be sustained, then freight transport is needed to keep shop shelves filled and businesses supplied.
“By cutting fuel duty by 1 penny per litre, the Chancellor has effectively saved industry £125m this year. FTA fought hard for future fuel duty rises to be set on a budget-by-budget basis with decisions reflecting world oil prices. His plans to cancel the fuel duty escalator while oil prices are above $75 heeds our call to stabilise the impact of volatile prices and takes future uncertainty out of a key component of our members’ costs.
“Times are incredibly tough in the logistics sector right now, with carriers unable to recoup rising costs and facing a cash flow squeeze. The Chancellor is right to recognise that going ahead with an above inflation fuel duty policy would have been suicidal for the UK’s economy. His decision to keep VED levels unchanged shows how intently Government has listened to us, for which they should be congratulated.”
RHA chief executive Geoff Dunning
“Today’s news will certainly get a cautious welcome from UK hauliers. The current unrest in the Middle East is seeing oil prices rising on an almost daily basis. Every $3 on the barrel price equates to an extra 1 penny per litre at the pump; a cost that the haulier has no choice but to pass on. Today’s cut will go some way to bringing relief to an industry that has quite literally been fighting for its survival. However, the inflation element has not been cancelled but simply postponed and we face two sharp increases I quick succession next year.
“The tireless campaigning that has taken place over the past few months has paid off; it makes a welcome change for a Chancellor to not only listen, but to take positive action.
“The RHA’s weekly fuel survey shows that costs for a heavy goods vehicle have risen by £2,700 a year in just six weeks! Hauliers have no choice but to recover these increases through higher haulage rates. We know that other costs are rising sharply but today’s cuts will bring some relief to hauliers and their customers.”
CILT chief executive Steve Agg
“This step will assist hard pressed freight and passenger transport operators who have struggled with the consequences of the higher fuel prices resulting from the 35 per cent increase in the price of oil over the last five months, and which are forecast to continue rising.
“Transport costs represent around 15 per cent of the price of food and drink and many other consumer items, and around one third of those transport costs relate to fuel. This cut in duty will help to contain increases in transport costs and their contribution to inflation.
“The redoubling of the line between Swindon and Kemble and reconfirmation of the electrification of the Greater Western Main Line between London and south-west England and Wales will increase capacity and mobility between regions and encourage further economic regeneration of these key areas.
“While it’s fair that air passengers pay some duty, they have faced large increases in this tax over recent years so this latest freeze is welcome. The exemption on APD for private jet users was always iniquitous and it is right that the Chancellor is seeking to end it.
“Taken together, and along with, the announcement of additional local enterprise zones and apprenticeships, these are sensible measures for transport and logistics that should contribute to the growth and re-balancing of the economy that the Government is seeking.”
Wincanton managing director Gordon Scott
“Wincanton welcomes today’s announcement, on behalf of the industry and its customers. It is clear that the current economic conditions will continue to impact us all, but in the face of rising costs and uncertain market conditions it is reassuring to see that the Government has acknowledged the critical impact that rising fuel prices can have on businesses and the public alike.
“But in today’s challenging environment we, as an industry, recognise the need to develop long-term solutions to mitigate against sustained rises in costs that impact both our customers and the wider public.
“Managing this part of our operation is core to our everyday business. As such we have a range of strategies in place to help us to minimise the impact of rising costs on our customers and the wider public.
“To this end, we are now calling on the Government to allow our industry to use longer trucks on UK roads. The take up of these vehicles by the industry could result in fuel savings of £1.8 billion annually. These savings are poised to come at a crucial time, as the industry searches for a solution to mitigate against rising costs.
“But, this change requires new legislation before we can offer it as a viable option.”
LPR managing director Jane Gorick
“Today’s reduction in fuel duty and introduction of a fuel price stabiliser could change the future of the UK logistics industry. It is really positive and encouraging that the government has heeded the concerns of the UK’s 33 million motorists, motoring groups and business organisations and has reduced fuel duty, frozen HGV excise rates, introduced a fuel stabiliser and cancelled the fuel duty escalator in this year’s Budget. However, while this provides a welcome respite to homes and businesses throughout the UK, it may not be enough on its own to safeguard the future of the UK logistics industry.
“In the last year alone, VAT on petrol has risen by 5p a litre and on diesel by 6p a litre – a hardship for the family budget and a potential catastrophe for the UK economy. Figures from the Federation of Small Businesses have suggested that eight in ten small firms have been negatively impacted by rises in fuel duty – and, with uncertainty in the crude oil markets due to political turmoil in oil-producing nations, we’re unlikely to see oil prices fall dramatically any time soon.
“Haulage companies are inevitably the first – and worst – hit by these costs but this also has a knock-on effect on the rest of the supply chain. For example, as a pallet provider, we are faced with fuel escalation clauses in our contracts with our logistics partners. As their fuel costs increase, so does our bill. However, the speed at which fuel prices are rising presents a challenge to businesses such as ours, where it is contractually difficult to pass the rises on. Fundamentally, this can put our customer relationships at risk, as well as hitting our bottom line hard.
“LPR has spent the last eight years in the UK – and almost 20 years in Europe – introducing innovative ways of working and collaborative partnerships in order to reduce empty running, mileage and fuel consumption. Despite this, fuel increases still hit hard and, like all businesses, we have to be continually challenging our operations to ensure we keep the impact to a minimum.
“If haulage companies in the UK are to remain competitive with the rest of the world and not be outdone by European businesses, we must operate on fairer grounds. At the moment we have one of the highest diesel prices in Europe. While there is no doubt that the fuel duty brings in much-needed funds to cover the country’s deficit, there will be little benefit if continual rises put the UK’s small and medium firms out of business. For the logistics provider purchasing hundreds of thousands of litres of fuel each year, a reduction of a few pence can be the difference between business success and failure.
“The UK government has taken a step forward with this Budget, but, it still may not be enough for many of the country’s logistics firms which have struggled over the last few years with continual fuel price hikes and an increase in VAT to 20 per cent. There is a real need for these vital UK businesses, which contribute over £74 billion to the economy each year, to be involved in shaping fuel policy going forward.
“A three year freeze on domestic legislation, a relaxation of health and safety regulation and an audit of existing red tape does not go far enough for the many small and medium-sized businesses in the UK.
“Of course it is good news for small and medium businesses that the vast quantity of legislation emanating from Whitehall is to be curbed. But, there is still a long way to go if we are to help those businesses – which make up over 90 per cent of the UK economy – to operate effectively and successfully.
“For example, the logistics industry is traditionally a 24/7 working environment. Shifts are common, a lot of travel is involved and long hours are not unheard of. As a result, the sector has fallen foul of a lot of red tape around flexible working, health and safety and maternity/paternity leave extensions. This has potentially stifled innovation, impacted on growth and limited diversity within the workforce.
“For the sector to thrive, we need sensible rules which reward solid business models and innovation, allowing businesses the flexibility they need to concentrate on their core activity (rather than completing paperwork). These rules must operate in the favour of the employer while still remaining fair to the employee. For example, in a business of fewer than 30 people, for one person to take a year off due to maternity or paternity leave, the impact can be long-lasting.”
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