How Important is the Fuel Tax Cut for Delivery Costs?

Inflation is constantly on the rise at the minute and everyone is feeling the pinch, especially the logistics industry. So much so, Logistics UK has reached out to Chancellor Naghim Zahawi MP to help protect the nation’s supply chain and delivery costs with a fuel tax cut.

One way to prevent price rises would be to introduce a fuel tax cut of 6p per litre. In this article, we will look into the increase in fuel costs, how this affects the logistics industry and how the fuel tax cut could help.

Increasing Fuel Costs & Impact on Delivery Costs

Since the beginning of 2022, there has been a significant increase in diesel prices – 34% to be exact. Logistics operators pay a duty rate which is 63.5% higher than the EU average, so this immediately impacts delivery costs which have seen a significant rise in-line with these prices.

Whilst operating on narrow margins, the logistics industry is struggling to deal with these inflating costs along with keeping the country afloat with the goods it needs. Fuel prices have risen over the last couple of years due to Russia’s invasion of Ukraine and the increase in demand after COVID restrictions were lifted.

The UK is desperate for a resolution and relief from these hiking prices which is why the industry has called on the government for help.

Logistics UK Request & Reasoning

The knock-on effect of the escalated prices of fuel will be detrimental to consumers and businesses. The majority of supply chain journeys are by road, so change needs to happen at the root of the process which starts with fuel prices.

In March, there was a 5p per litre cut to tax duty which helped costs initially, but the inflation since then means it is not as effective. A further 6p per litre duty reduction would be beneficial for the industry to help sustain the supply chain during this difficult time. It is estimated that this 6p tax cut would save on average £2,424 per year per 44-tonne truck.

Another suggestion from Logistics UK was to adopt a similar dynamic system used in Portugal. This is where the fuel tax duty is reduced on a weekly basis if the VAT increases on fuel sales.

The Future of the Logistics Industry

There is no doubt that the logistics industry has seen its fair share of issues recently, from driver shortages to rising fuel and delivery costs. However, with prices rising for everyone in the UK, this might give the sector some breathing room for the time being.

Although no one can predict the future, we hope the industry gets the support we need and we are always so proud of our resilience and adaptability.

You can rely on Portman Logistics, so get in touch with us today to find out what we can do for you.