Logistics Has The Map For Delivering Growth In Every Postcode, But Budget Must Address Cost Pressures

(Copyright, Logistics UK, reproduced with kind permission)



As an industry with a reach that covers every inch of the UK, the logistics sector has the footprint and high value jobs to support the government in meeting its target of delivering growth in every postcode. However, achieving that will require policy measures to support logistics businesses to manage the sustained cost pressures they are experiencing and help the wider economy thrive. So says business group Logistics UK in its formal submission to the government ahead of the Autumn Budget, which the Chancellor will deliver on 28 October.

"As a sector, we employ 2.6 million people across the economy and enable more than £1 trillion of trade every year," says the business group's Chief Executive Ben Fletcher, "and that means our members are uniquely positioned to unlock regional growth, address the NEETs crisis and drive the government's reindustrialisation agenda. The government can work with our sector to deliver that growth by helping to shift the focus to investment, in what has been a very tough year dominated by the Middle East conflict and the cost pressures it is driving, which risk pushing up the cost of living."

The submission from Logistics UK, the only trade body to represent the whole of logistics, recognises the importance of the previous government's £250 million package of measures to support the industry from the effects of the Middle East conflict, which include an ongoing fuel duty freeze, vehicle excise duty concessions and red diesel price controls for rail freight. As part of this Autumn's Budget, Logistics UK is recommending how through continued support, the government can create an environment that encourages long-term investment and enables businesses to deliver growth.

Logistics UK's research shows overall business confidence is improving1 and the trade body has identified the Autumn Budget as an opportunity for the government to nurture this sentiment. To encourage growth and address the cost of living, Logistics UK is urging Chancellor John Healey to maintain the current fuel duty rate, including the 5p cut; reform business rates to encourage investment in warehousing, freight infrastructure and supply chain productivity; and include logistics within the British Industrial Competitiveness Scheme (BICS) to reduce the cost of electricity as battery vehicles become even more prevalent. 

"Our sector is starting to drive the green shoots of economic recovery," continued Fletcher, "but there is still much to be done. We are urging the Chancellor to create a cost-competitive business environment that will nurture the improvements in business confidence that we are beginning to see. 

"Key to this is maintaining the current rate of fuel duty, including the 5p cut. Fuel accounts for roughly one-third of a HGV fleet's running costs, so any increases in fuel duty can significantly affect business viability, investment decisions and the cost of living.

"Warehouses, distribution hubs and freight terminals are critical national assets but, the current property tax regime can act as a disincentive to investment. Logistics businesses are facing significant pressures from rising costs, yet even before April's increases in the business rates on warehouses, the industrial sector, of which logistics is a significant proportion, paid more than £7.5 billion in business rates across England and Wales in 2023. Reforms are needed so the tax system supports, rather than discourages, business investment and economic growth.

"As operators continue the switch to cleaner battery vehicles, the logistics sector will become an electricity-intensive sector in the coming years, and the sector needs to be included within the British Industrial Competitiveness Scheme. The UK currently has some of the most expensive industrial electricity in the world and removing policy costs from business electricity bills will help the sector decarbonise and keep the UK internationally competitive.

"The Middle East conflict has demonstrated that events outside the UK can quickly translate into increased costs for businesses and consumers, due to rising fuel prices and shipping disruption. The conflict is not over, and the sector will have to continue managing fuel price volatility for the foreseeable future. This is why it is not the time to increase fuel duty, and any increase is likely to have a double inflationary knock-on effect for consumers, as prices rise in the shops as well as at the pumps.

"And finally, it is not just about the health of our sector: if the government wants to build houses and infrastructure, increase overseas exports, grow domestic manufacturing and defence capability, boost the hospitality and retail sectors and bring down the cost of living pressures on consumers it needs a strong, cost effective and resilient logistics industry. We are the driving force of economic growth and prosperity."

Logistics UK is one of the UK's biggest business groups, representing logistics businesses which are vital to keeping the UK trading, and more than seven million people directly employed in the making, selling and moving of goods. With decarbonisation, 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. Logistics UK supports, shapes and stands up for safe and efficient logistics, and is the only business group which represents the whole industry, with members from the road, rail, water and air industries, as well as the buyers of freight services such as retailers and manufacturers whose businesses depend on the efficient movement of goods. For more information about the organisation and its work, please visit logistics.org.uk