Logistics UK webinar throws light on the Chancellor’s Spring Budget, by Matt Harrington, Senior Policy Manager 

Mariefi Kamizouli, Head of Economics and Productivity, Logistics UK, introduced the two speakers, Ben Garratt, Logistics UK’s Deputy Director – Public Affairs, and Andy Fitt, Logistics UK’s Executive Membership Associate.  

After outlining the scale of the logistics sector in the UK, which employs more than 2.7 million people, Kamizouli gave an update on broader economic and fiscal developments. 

The Office for Budget Responsibility’s (OBR) recent outlook provided a cautiously optimistic view of the UK economy, she said, forecasting a slight improvement in real disposable income, despite a fall of 2%. Economic activity is showing signs of resilience, with GDP growth expected to be 0.8% this year, improving to 1.9% next.  

However, the industry must also contend with increased economic inactivity, which could present challenges in workforce availability and operational efficiency.  

“It’s essential for our companies to explore innovative solutions and possibly invest in automation to navigate these challenges,” Kamizouli argued. 

Government borrowing is showing little change, and the UK’s national debt is projected to fall below 94% by 2028-29. 

Concluding, Kamizouli said: “As we navigate this evolving economic landscape, it’s paramount for us to remain vigilant and adaptable. The positive economic trajectory provides a supportive backdrop for the logistics sector, yet the challenges of economic inactivity and the tight labour market require strategic responses.” 

LOGISTICS UK’S KEY ASKS AHEAD OF BUDGET 
Before getting into the Budget measures of relevance to logistics, Ben Garratt was asked to outline the arguments Logistics UK had made to HM Treasury and government more broadly, about what the industry wants. 

The Budget and the opportunity to write to the Treasury beforehand was part of Logistics UK’s broader work to share with government and what its strategic priorities are for the country. 

“Principally, what we're calling on from the government is a dedicated minister for logistics and supply chain who is backed by the Cabinet Office, backed by the centre of government,” Garratt said. 

The aspiration is for logistics to forge a very close private-public partnership with government, which includes the Department for Transport (DfT), but also goes beyond it. While DfT’s 2022 Future of Freight plan is a good strategy for the sector, its delivery will need cross-departmental support, which will require a Whitehall restructure.  

“The Labour Party is talking a lot about this too, and if they win the coming general election, they will base government around their missions,” Garratt said, “That is the key to the Whitehall machinery that we are seeking a change to in terms of policy areas.”   

Garratt then outlined several of Logistics UK’s key campaigns: the call for innovative and integrated infrastructure; a fair transition to a green economy; a skills partnership to support a thriving sector; and backing trade as a driver of innovation and productivity. 

REFLECTIONS ON BUDGET 
Many commentators have noted that the latest Budget was more consumer than business focused, Garratt acknowledged. However, if you looked at the Budget and the autumn statement as a pair it was possible to find government support for business.  

“The key piece in there for businesses, which the Chancellor talks about a lot, is making full expensing capital expenditure permanent. That is a reform to the tax regime to make it more tax deductible when businesses invest in capital, invest in their future within year. That is a significant cost to the Treasury, but obviously with the hope of spurring business investment and growth.” 

The other piece, which does not necessarily benefit logistics, is the focus on high-growth, innovative industries, but while innovation exists in logistics, as a longstanding sector it is not perceived to be at the centre of that space in the same was as bioscience or AI, for example. 

POSITIVE MEASURES FOR LOGISTICS 
The measure that Logistics UK is most pleased that it secured from the Budget is the freeze on Fuel Duty, meaning the five pence per litre cut will continue for another year. It was important that logistics makes clear how much of its cost base goes on fuel, and that fuel inflation impacts on the whole economy. 

“We've also been making clear – and it feels like we're winning this argument – that making Fuel Duty more expensive doesn't reduce the price of decarbonisation,” Garratt said, “We know business wants to do that and we know doing that is expensive. So actually, increasing the price of fuel just diminishes the ability of the sector to invest in its future.”   

The gas duty differential was due for review and the Chancellor announced that that is going to stay until 2032. With many members using biomethane as a bridging fuel to reduce their carbon emissions, that is an important piece, he argued. 

DISAPPOINTMENTING OMISSIONS 
What we did not see from the Budget is a broader move on low carbon fuels, which Logistics UK called for. The much-delayed low carbon fuel strategy, which the industry is waiting for, will set out how government approaches low carbon fuels. 

“That would, we assume, underpin anything the Chancellor does in that space,” he said.  

On whether there were any other disappointments in the Budget, Garratt maintained that there was a lot more that government could do in the decarbonisation space. 

There is a huge focus on energy generation, which is important for overall decarbonisation. The Labour Party has said that if it wins power it will bring forward the decarbonisation of the grid by five years. However, Logistics UK wants to see more focus on the demand side too, to support depot and public charging. 

“In terms of monetary support for decarbonisation, that was lacking,” Garratt concluded. 

OTHER MEASURES OF NOTE 
Logistics UK has called for the full expensing of capital to be extended to leased and rented assets. That’s because the current regime can be used for the purchase of vehicles, but not for the many logistics businesses that rent or lease vehicles. 

“Positive news is that the Chancellor heard those requests and that there will be draft legislation, backed by a consultation, to look into how to make that happen,” Garratt said, “But it’s very unlikely that that will happen within this parliament, so that’s something we will have to work on as a sector to keep the pressure on.” 

Another reform Logistics UK would like to see is full expensing for the fees that logistics companies pay to energy network operators for asset extensions, because these are not capital owned by the logistics sector, they are capital owned by the energy networks. 

There was a pilot announced for an upskilling fund for SMEs to get their head around how to benefit from AI. “It’s only a pilot, which could be expanded, but it could be a real benefit to many small businesses in the logistics sector to be able to get access to really good training to take advantage of AI tools to deliver efficiencies in logistics,” he said. 

KEY PRIORITIES AND FOCUS POINTS FOR THE FUTURE 
Considering the outcomes and ongoing needs of the logistics sector, as highlighted in the Budget, the key priority for the logistics sector is the need for consistency and clarity, Garratt argued. 

Logistics UK issued a national manifesto in January, plus manifestos for London, the North and the Midlands, where there is both a significant logistics presence and mayoral elections pending. 

“We need to main consistency in what we’re calling for, so politicians understand what our sector is all about and what we need,” he said, “That we underpin the economy, that we deliver significant growth in the sector, that we employ 8% of the working population. That’s the argument – that we can deliver up to £8 billion more in productivity-led growth, if backed by the right policies.” 

Doing what logistics already does more productively could deliver significant growth across the country, Garratt argued.  

On infrastructure, Logistics UK would really like to see the government’s commitment to a national freight network taken forward and whoever forms the next government to keep going with that policy. 

On decarbonisation, the sector principally needs a closer relationship with the government and a road map developed in partnership. This is complicated because it is not one solution, it is many solutions for different parts of the sector which need to be mapped out. 

Plus, the role that technology and innovation will play in changing the sector, how it will change roles and can be used to attract new generations of people in the sector.  

Concluding, Garratt said that reducing border friction was key.  

“When government is thinking about its aspirations for the future of trade, it's not just about the things that get traded and how they are made, but crucially how they are moved,” he argued, “And therefore, we want to attract more attention on our key international gateways plus the road and rail connections to those gateways, because making those efficient will make it easier for manufacturers and other sectors to export.” 

Published On: 14/03/2024 00:00:00

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