The Transport Exchange Group (TEG) is warning that operators will face higher costs with the return of the HGV levy and the expansion of ULEZ, which could see them raise their prices.

However this may be offset by the impact of the government’s anti-ULEZ stance, following the Tories narrow win in the Uxbridge and South Ruislip by-election, along with its support for fossil fuels.

TEG said that “this may mean electric vehicle investment suddenly becomes less necessary – as will road transport price hikes”.

It added that this government strategy raises a question mark over whether it will actually ban production of new small diesel trucks (by 2035) and new 26-tonne-plus trucks (by 2040), TEG said.

“This means uncertainty for operators considering switching to an electric fleet - and those who’ve made the switch in the hope of infrastructure improvements,” it added.

Instead, TEG suggests, some hauliers and couriers might follow the example of Royal Mail and PepsiCo, which have introduced hydrotreated vegetable oil (HVO) as an alternative fuel, since HVO is a less expensive and time-consuming switch, creating 80% less greenhouse gases per mile than diesel.

TEG’s analysis is on the back of its latest Road Transport Price Index, published this week, which reveals that road transport prices fell 2.13% during July, with haulage prices dropping just under 4%.

TEG said that despite these falls, prices have been relatively stable so far this year, marching slowly upwards since February.

It said the combined haulage and courier index rose by less than 8 points up to July. And the courier price-per-mile has remained almost unchanged since April 2023 – a continuing trend with no change from June 2023 to July 2023.

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Lyall Cresswell, TEG chief executive and new platform Integra, said: “While it could feel like a reprieve for some, the government’s U-turn on green policy will leave many road transport firms disappointed.

“Those who’ve invested in electric fleets might feel they’ve been left high and dry. They may now have doubts about whether any improvements in EV infrastructure will be forthcoming.

“For years, the government has been encouraging operators to go electric. And, of course, the most effective way to encourage EV adoption is the upcoming ban on new diesel vehicles. If the government scraps that ban, years of planning could go out of the window for some companies.

“HVO fuel will now play an even more important role in helping the road freight industry decarbonise much of its activity, before true net zero is feasible for many companies.

“The good news — particularly for smaller firms – is that HVO fuel is cheaper and quicker to introduce, allowing companies to become greener sooner.”

Kirsten Tisdale, director of logistics consultants Aricia and Fellow of the Chartered Institute of Logistics & Transport, said: “The Bank of England has just put the rate of interest up for the fourteenth time to continue to fight inflation.

“However, the courier element of the TEG Road Transport Index is deflationary for the first time in over 30 months and the haulage element has been showing year-on-year deflation for 14 months.

“The price of fuel has come down from its high a while back, and there’s a bit less pressure for many on the staffing side at the moment, although that pressure will change as we approach peak. But I can’t be the only one asking: is that interest rate increase one too many?”