A cut in UK fuel duty has been welcomed by business groups as a move that will “ease some of the burdens facing supply chains”.
In his spring statement chancellor Rishi Sunak said fuel duty would be cut by 5p per litre for a period of 12 months. It has been calculated this will save an average £2,356 per HGV.
Commodity prices, already high following the pandemic, have spiked after Russia invaded Ukaine, with oil trading above $100 a barrel and UK inflation hitting a 30-year high of 6.2%.
“The actions we have taken of sanctioning the Putin regime are not cost-free,” Sunak said.
Elizabeth de Jong, director of policy at Logistics UK, said: “With average fuel prices reaching the highest level on record and rising inflation, there has been an unstainable burden on logistics businesses, which operate on very narrow margins of around 1%.
“The chancellor’s decision today will help to ensure operators can continue to afford supplying the nation with all the goods it needs, including food, medicine and other essential items.
“Fuel is the single biggest expense incurred by logistics operators, accounting for a third of the annual operating cost of an HGV.”
De Jong said the duty cut would “help to strengthen the UK’s supply chain during a time of ongoing financial and operational challenges”.
Alistair Baxter, head of receivables finance at fintech firm Taulia, said the cut would “not fix all of the issues”.
“We expect that these cuts will help facilitate trade and ease some of the burdens facing supply chains in Britain,” he said.
But he added: “The ongoing energy crisis coupled with the fact inflation is set to hit 8% later this year will force CFOs to think strategically about supply networks and about embracing a more greener way of transporting goods, including freight and electric vehicles.”
A survey of 1,000 CFOs by consultancy Proxima found 84% thought the government should be doing more to tackle inflation, with 46% saying the government should be capping energy prices for businesses.
A further 41% said the government should be “actively intervening by sourcing certain goods” and 42% said it should be “making it easier to bring in goods from the European Union”.
Nine in 10 said they were experiencing inflation and for more than 40% the level of inflation was 6-10%.
The Food and Drink Federation (FDF) has said “higher prices are inevitable” following spikes in wheat and sunflower prices due to the war.
Karen Betts, chief executive at the FDF, said: “Food and drink manufacturers are in a bind. They cannot see a let-up this year in the inexorable rise of input costs — ingredients, raw materials, energy and so on. One company told me it expects energy costs to rise by up to 500% this year.
“Businesses are urgently stripping further costs out of their processes. But there are limits. With margins squeezed suddenly and severely, higher prices are inevitable.”
The CBI said the proportion of manufacturers expecting to raise prices in the next three months rose to a record high of 80% in March, up on 77% in February.
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