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Decarbonisation still in the rearview mirror, Logistics UK says


With the deadline for achieving net zero by 2050 drawing closer and many logistics businesses operating on already tight margins, the super-deduction programme – introduced on 1 April 2021 – was widely welcomed as it allowed companies to claim 130% capital allowances on qualifying plant and machinery investments.

Before the scheme concluded at the end of March 2023, Logistics UK – along with seven other trade associations – sent a joint letter to Chancellor Jeremy Hunt MP, calling for a more flexible Green Super-Deduction scheme to provide businesses with continued investment support. 

FINANCIAL PRESSURES MOUNT

Following Chancellor Jeremy Hunt’s Spring Budget announcement last month (March 2023), Logistics UK was delighted to see that its call for a 100% tax deduction on capital investment, detailed in the joint letter, to support the transition to net zero and increase productivity, had been acknowledged and implemented in the Budget. To hit decarbonisation targets, logistics businesses are increasingly assessing their operations to transition to greener technologies but with increased financial pressures, but uncertainty remains regarding the best approach to achieve net zero. Companies are already facing a 12.6% rise in vehicle operating costs, and a reduction in energy support.

LEASING AND SHORT-TERM HIRE

Rising costs mean that more companies are reconsidering the purchase of assets outright, and are looking to lease or short-term hire, especially for any businesses who only need use on a part-time basis. Leasing or hiring offers businesses more options for acquiring new green plant and machinery technology, including vehicles, because it can help to mitigate some of the associated risks and costs. Given that zero and low emission vehicles remain significantly more expensive to buy and with technologies developing at pace, flexible leasing arrangements can allow operators to move more quickly to decarbonise, take advantage of lower vehicle operating costs and make upgrading vehicles easier. So while continuing to allow capital expenditure to be offset against taxes for plant and machinery is welcome, the sector needs more certainty from government that it will maintain its support for investment and introduce a more flexible approach that will provide financial support and encourage greater investment in zero emission technologies as highlighted in the joint letter.

The 5ppl Fuel Duty cut, which was originally introduced in March 2022, is critical for keeping the logistics sector afloat during the ongoing war with Ukraine and supporting the country as it continues to navigate through high inflation rates.

Denise Beedell, Senior Policy Manager, Logistics UK, (pictured above) said: “With the cost-of-living crisis still affecting many people, Logistics UK members are glad to see the 5ppl Fuel Duty cut is to be retained for a further 12 months as it will increase the funds that the sector has available to invest in decarbonisation. This is welcome news for logistics businesses, particularly SMEs which make up 99% of the industry.”

The Fuel Duty cut will help to ensure businesses have the funds to invest in productivity, growth and greener technologies, alongside the new policy for full capital expenditure, providing it encourages the transition to a zero-carbon economy.

LACK OF SUPPORT WITH ENERGY COSTS

Within the Budget announcement, Beedell argues that there was a glaring lack of support to help businesses with energy costs and the logistics sector’s transition to a low carbon economy, despite the government repeatedly urging the industry to commit to this.

“Furthermore, members have expressed their disappointment at the sheer lack of comment regarding the reform of the Apprenticeship Levy,” she said, “As well as no mention of a strategy for low-carbon fuels or support for depot charging.”

Another glaring omission in the Budget was the failure to comment on a long-term plan for infrastructure investment.

“This is a crucial missed opportunity and raises concerns about proposals for a reformed HGV road user levy,” Beedell said, “Logistics UK will be working closely with government, seeking urgent clarification as to the detail involved.” 

LOGISTICS – INTEGRAL TO THE WIDER ECONOMY

The logistics industry is a highly versatile and essential part of the UK economy, without which the UK’s supply chains would fall apart, businesses would close, and the country would come to a standstill.

“Logistics UK hopes that the Chancellor stands by his promise to invest in green growth and fulfilling careers, while keeping prices down in the shops,” Beedell concluded, “In addition, we will still push forward on government producing a low carbon fuels (LCFs) strategy to enable the sector to reduce their greenhouse gas emissions immediately, until zero-emission at the tailpipe vehicles reach the market at scale.”

*www.logistics.org.uk/campaigns/logistics-and-the-economy

Published On: 06/04/2023 15:00:52

 

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