Pallet networks are demanding that the government pause VAT on diesel for hauliers in light of soaring prices and the knock-on effect on the cost of goods.

The Association of Pallet Networks (APN) said fuel represented a third of total haulage costs and operators will be unable to sustain their work without passing the rising costs on to customers, which then risks spiralling inflation.

The APN has written to the chancellor of the exchequer and the transport secretary to request the intervention and saying that a VAT exemption would mitigate cashflow pressures for both hauliers and consumers.

It has also asked that fuel duty is frozen at the current level for haulage firms and other essential users.

The APN’s move came as the RAC said a petition calling for a 40% reduction in fuel duty and VAT for two years was heading towards 100,000 signatures, meaning it will have to be debated in Parliament.

Although the petition was launched last year, it has gathered momentum in recent weeks due to the impact the Russian invasion of Ukraine has had on the price of fuel.

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APN chairman Paul Sanders said: “While we appreciate that fuel duty is important revenue for the Treasury, and a way of incentivising decarbonisation, most haulage operations have no choice but to use diesel for the foreseeable future.

“Higher fuel duty is therefore not an incentive to change, but a penalty.

“If the chancellor wishes to protect the UK economy and British households from spiralling inflation in the light of current events, sparing the logistics industry some of these price rises is a logical step.

“Hauliers are already struggling to get freight customers to accept higher pricing, and this could prove the final stress for many haulage firms.”

RAC fuel spokesman Simon Williams said: “Prices at the pumps have been breaking records on a daily basis and to make matters worse the price increases have been seriously steep recently.

“We believe the Chancellor must take immediate action by cutting VAT on fuel to at least 15% to give drivers some instant respite and to protect them from future increases. The Chancellor could also temporarily reduce fuel duty, which is currently levied at 58p per litre, reducing this would help both businesses and consumers.”