Logistics UK is urging government to provide a package of support for the country’s logistics sector to avoid rising costs caused by the Middle East conflict from having a knock-on impact on the UK’s economy.
Ben Fletcher, Logistics UK chief executive, described the challenges the sector is facing. He said: “Logistics businesses operate on very narrow margins but are facing spiralling costs, most notably the price of fuel, with the cost of filling up a large HGV having risen by 30% to nearly £1,000 between 23 February and 6 April.
“Around half of businesses we’ve surveyed say they are passing on a lot of this cost, meaning higher prices on the shelves, and the other half are unable to, creating severe cash-flow issues.
“The pressures on our sector are unsustainable, and risk pushing up inflation, weakening growth and creating severe cash-flow issues for those who are responsible for keeping our shops stocked with food, our hospitals with medicines and our homes with access to the goods we rely on every day.
Fletcher called for immediate action from the government. “What our members need is an urgent package of support from government to help weather the storm.
“The policies we have proposed would also support logistics businesses to switch to net zero technologies over time, increasing the UK’s energy independence.”
In the short term, Logistics UK is pressing Chancellor Rachel Reeves to reconsider her plan to begin increasing fuel duty by 5p from September.
“Currently, the cost of fuel is the single biggest concern for our member businesses and the impact of the price rises is being felt most keenly by small and medium-sized enterprises, which often cannot pass on these increases to their customers,” he said.
Fletcher pointed out that from the end of February to 6 April, the Treasury has benefitted by an increase of more than £40m from VAT, thanks to fuel price rises, adding “So a decision to maintain the 5p per litre cut on fuel duty would not harm the tax take, and would be a welcome boost in such straightened times.”
Logistics UK is also urging the Chancellor to support the logistics sector with its electricity costs and the costs of decarbonisation, by including logistics in the British Industrial Competitiveness Scheme, and to bring it forward from 2027.
“The government’s energy support for businesses is focused on manufacturers but no sector can succeed without the logistics businesses that underpin them, and many parts of our industry, from chilled warehouses to electric HGVs, are facing higher electricity bills due to the conflict.
“Not only is this increasing costs for our members and across the economy, but it is also making it harder to switch to electric vehicles and support the UK’s energy independence. Reducing the duty on liquid low carbon fuels would also be a welcome step towards decarbonisation and away from dependence on the Gulf.”
Finally, Logistics UK is also urging the Chancellor to take action on business rates. Fletcher said: “The recent increase in business rates on warehouses and other parts of the logistics sector could not have come at a more unfortunate time which is why we are calling for it to be reversed for at least a year, and for the system to be properly reformed, so that businesses can better manage the pressures caused by the conflict and invest for the future.”
He concluded: “Logistics keeps the wheels of the economy turning, delivering everything the country needs, every day. In such difficult times it is imperative that our sector is supported, to avoid pushing up the cost of living and harming the UK’s growth prospects.”
