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Budget 2020 : What does it mean for UK logistics?

Plastic packaging tax to come into force and red diesel subsidy to be scrapped in the Spring Budget 2020.

Key points from Budget 2020

- Fuel duty to be frozen for 10th year in a row 

- High Street business rates to be reviewed 

- An extra £900m for research, to include electric vehicles.

- Plastic packaging tax from April 2022

- Manufacturers and importers whose products have less than 30% recyclable material will be charged £200 per tonne

- Subsidies for 'red diesel' will be scrapped for most sectors in two years' time

- More than £600bn to be spent on roads, rail, broadband and housing by the middle of 2025

- £27bn for motorways and other key roads, including new tunnel for the A303 near Stonehenge

 

The UK logistics industry reacts to 2020 budget

Cold Chain Federation chief executive Shane Brennan said: 

“Removing access to red diesel for cold chain hauliers adds £150million of costs to the businesses we rely on to keep our food safe. Two years is not enough time for businesses to make the changes to their fleet necessary. Far from supporting businesses to make investments in greener alternative technologies, this tax change will force businesses to batten down the hatches and use existing equipment for longer.

“Raising taxes in this way will generally undermine the confidence across the food supply chain and we now seek urgent talks with Ministers to understand if they are serious about helping food chain businesses to adapt to this change.“

Christopher Snelling, Head of UK Policy at FTA comments: 

“As the business organisation representing the logistics sector, FTA is urging government to reconsider its decision to increase the tax rate on red diesel as this will be very damaging to the businesses that rely on the fuel to keep vital products and services moving across the country when it comes into force. This move will not incentivise companies to transition to newer, cleaner diesel units, because they are no more fuel efficient; if anything, it will slow progress as companies will balance the increased running costs by keeping their current equipment longer.”  

While newer diesel equipment produces substantially lower local air quality emissions, this is achieved by cleaning the exhaust before emission, not through reduced fuel use. 

Snelling added “We are currently working with governmental departments to assess how to accelerate progression to cleaner units, but instead of waiting for this solution, we believe the government is taking this blunt, ineffective and costly action to give the appearance of progress, without regard to the realities of the use of these units.”

Prior to the announcement, FTA wrote to the Chancellor of the Exchequer, Rishi Sunak, to urge him to reconsider implementing this policy decision.  

Efficient logistics is vital to keep the UK trading, directly having an impact on more than seven million people employed in the making, selling and moving of goods.  With Brexit, new technology and other disruptive forces driving change in the way goods move across borders and through the supply chain, logistics has never been more important to UK plc.  A champion and challenger, FTA speaks to government with one voice on behalf of the whole sector, with members from the road, rail, sea and air industries, as well as the buyers of freight services such as retailers and manufacturers.

Lisa Hooker, consumer markets leader at PwC, said:

“This Budget has some good news for consumer industries facing the challenges of both restrained demand and the immediate effects of COVID19.

“In particular, the short term relief from business rates for smaller operators will be welcomed, and not just by retailers, but also by those in the leisure and hospitality sector, included for the first time.

“This Budget recognises the immediate challenges that consumer businesses face from COVID19 with both cash grants for the smallest businesses and business interruption loans for larger ones.

“There are reasons to cheer for many in the industry, with the alcohol duty freeze alongside increased business rates support for pubs.

“However, while the Government has again promised a wider business rates review, there is little immediate respite for larger retailers and leisure operators that account for the majority of rates income, and that will also bear the brunt of additional costs such as national living wage increases.

“But the UK’s consumer industry is nothing if not resilient, and it’s heartening to hear the emphasis that this Government is placing on the sector.”

Commenting on the transport announcements by the Chancellor, Jonathan Moss, head of transport at DWF said: 
 
"Rishi Sunak's debut Budget is delivered amidst the backdrop of the Covid-19 pandemic and is the first since the UK's departure from the EU. While the UK economy continues to face unprecedented challenges, the Budget introduces new funding to develop investment in roads, railways and digital networks. The second Road Investment Strategy ('RIS2') - a motorway and major A road investment project will commit £27 billion of public funds in the period 2020 to 2025. The Government also intends to invest £20 million to develop the Midlands Rail Hub and to allocate £1 billion in cities' transport, from the Transforming Cities Fund. 
 
"In the year that the UK looks to hold the COP26 UN Climate Summit, the Budget introduces tangible steps to decarbonise the economy, while protecting the UK's natural heritage. RIS2 will be rolled out in synchronisation with consumer incentives to support innovative transport technology including £500 million to support fast-charging hubs for electric vehicles, £304 million to reduce nitrogen dioxide emissions. The Chancellor announced he will remove the entitlement to use red diesel from April 2022 except in agriculture, fish farming, rail, and non-commercial heating. Finally, on entering a new decade with a new Budget, Rishi Sunak has shown that he wishes to direct the UK towards sustaining low carbon transport, natural climate solutions and carbon capture and storage. With fuel duty remaining frozen for the tenth year in a row, there is debate about whether the initiatives will go far enough to meet net-zero target aims."

Commenting on today’s Budget from a retail perspective, Paul Martin, UK head of retail at KPMG, said:

“After considerable campaigning by the disgruntled retail industry, mention of business rates during the Budget was to be expected. Of course, the payment holiday announced by the Chancellor will be welcomed by those it benefits, but it does only apply to a very small proportion of players – those with rateable values of less than £51,000. It would also appear that hopes of a fundamental review will have to wait until the Autumn Statement. But for those running out of puff, that could well be too long. Indeed, KPMG analysis recently revealed that retail was the top sector for companies facing financial stress and distress. 

“There’s no denying that smaller retailers are a vital part of the retail industry – often at the heart of local communities –  but the survival of prominent high street names also represents a real concern in the current climate. For many of these players, rates are the largest operational expense they have to contend with. The amount of business rates they are paying – given their vast high street presence – is out of kilter with the amounts paid by online businesses who need only consider their warehousing and logistics real estate. Essentially, the more traditional take on retail is being penalised as things currently stand. 

“We have to remember, retailers are mass employers in the UK and their survival has a very human impact in terms of both employment and the shape of our high streets. Some of the changes we are witnessing are the fallout of changing consumer behaviour, but retailers are also contending with a myriad of pressures, whether it’s Brexit uncertainty or the potential impact of COVID-19. The Fundamental Review of business rates to come will be the key focus for most. It holds the potential to rewrite the future of traditional retail in the UK.” 

Responding to today’s Budget, Sir John Armitt, Chair of the National Infrastructure Commission, said:
 
“The government’s level of ambition is welcome, and we look forward to seeing how the National Infrastructure Strategy will build on this in addressing the UK’s long-term needs.
 
“We are particularly encouraged by today’s announcements on five-year funding settlements for city leaders to invest in local transport improvements, and by the additional investment in electric vehicle charging points, both of which are in line with our National Infrastructure Assessment recommendations.
 
 

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