Spring Budget: Opportunities and Challenges for Logistics
Monday 3rd April 2023 | View all Blogs

The Chancellor's Spring Budget was recently announced, and there were some notable changes, introductions and announcements that may create a few talking points within the industry.

Well, did the Budget deliver? Let’s find out…

Frozen in Place

It’s no secret that the country faced massive hikes in the price of fuel last year, and as an attempt to reduce the effect, the then Chancellor, Rishi Sunak, announced a cut in fuel duty to 5 pence per litre.

One of the biggest announcements by the Chancellor is that the reduced fuel duty originally introduced last March is to be extended for another 12 months.

man standing at fuel pump

Any freeze or cut in fuel duty is always a welcome change for the logistics industry, especially small firms that will always benefit from a reduction in costs, as fuel is a major expense for most firms.

Although he is pleased to see the fuel duty frozen at 5p a litre, Declan Pang, Director of Public Affairs & Policy for the RHA also commented that the Chancellor could have gone "much further" to support hauliers.

And so are we! Many firms across the country have urged the government to keep the frozen duty in place, and it’s excellent to see the correct decision being made. This industry is at the forefront of the economy, and seeing positive actions like this is bound to reduce logistics costs and economic pressures for all, ultimately allowing businesses across the country and globe to have the money to invest, grow and thrive. 

A Duty to Deliver

Alongside the welcome freeze in fuel duty, the Chancellor also announced a freeze in Vehicle Excise Duty (VED) for HGVs, lasting until 2024. 

old tax disc

Once again, this is a great announcement for this industry, and freezing duty will allow them to employ more HGVs to carry out the daily tasks that keep our country and supply chain running. 

Levies Make a Comeback

August will see the return of the HGV levy, but the purpose will have a different focus.

The levy was introduced in 2014 and served as a means to ensure overseas workers contributed to the upkeep of our roads, but it was suspended in 2020 to help support and recover the transport and haulage sector during the pandemic.

The reintroduction of the levy will now shift focus towards the environmental impact of the vehicle, meaning HGVs that produce lower emissions will have cheaper levies. 

While the introduction of another expense is another burden that is unwanted by the industry, the incentive to switch to lower-emissions vehicles will be an effective way of encouraging hauliers to consider the steps they can take towards reducing the industry's carbon footprint.

A Dramatic Deflation

One of the biggest talking points in the budget is a major drop in inflation, as the Consumer Price Index estimates inflation will fall from a staggering 11.1% to just 2.9% by the end of 2023! 

That’s an enormous decrease of 8.2%, and is vital to rebuilding the current economy, which took a massive blow after the cost of living crisis and the huge inflation spike.

Inflation is a measure of the rate at which the prices of goods and services rise and fall over time. Therefore, a high inflation rate means the cost of living will also be high, as goods and services are more expensive. This is bad news for both consumers and businesses; consumers will have less money to buy everyday essentials, which ultimately means businesses will see a decrease in custom.

inflation graph

Not only that, but services such as utilities, electricity, gas and rent will increase, which can spell disaster for both consumers and businesses alike. 

However, the forecasted drop in inflation rate is definitely something to celebrate for all, as lower costs mean more disposable income and an increase in customers for businesses. This is fantastic for growing our economy. 

A Welcome Investment

In general, the Budget also outlines a number of things that are not directly aimed at the industry, but will be beneficial nonetheless. 

Alongside this, the push for economic growth is also clear in the Spring Budget, which aims to implement the Chancellor’s strategy for growth, while focusing on 4 priorities:

  • Employment - an aim to increase employment, ultimately raising living standards and business growth
  • Education - giving people the necessary skills and knowledge to get the job they want, and boost the future economy
  • Enterprise - to attract and support the most productive and dynamic companies
  • Everywhere - to spread opportunity across the country with the Levelling Up scheme

Of course, this is great to hear. Any reduction in inflation along with a plan to increase economic growth is always welcome in every sector up and down the country, as lower prices will result in increased spending, no matter the industry, which will ultimately positively impact our economy. 

Additionally, the Chancellor announced the launch of 12 brand-new investment zones to support economic growth and bring investment into local areas. Zones will have up to £80m of interventions each per year over the course of five years, alongside grant funding and tax reliefs.

The Ongoing Crisis

Despite the positives, many logistics firms are disappointed by the lack of financial support for small and medium-sized businesses during the current energy crisis. This is one of the biggest concerns for many, as the sudden rise in costs has piled pressure onto many businesses and haulage companies alike.

smart meter screen

In fact, the energy crisis has been so detrimental, that 45% of businesses feared they may have to close as a result of soaring energy bills, and although the government introduced the Energy Price Guarantee last year, this is only temporary, and for businesses, it is simply a discount and not a permanent price cap.

Round Up

Overall, the Chancellor's Spring budget has provided a mixed bag of opportunities and challenges for the logistics industry. The frozen fuel and vehicle excise duty for HGVs are both positive developments that can help drive growth and productivity in the sector. 

However, the reintroduction of the HGV levy and lack of support for energy costs may create additional challenges for logistics companies that are already operating on thin margins. The impact of Brexit and ongoing global supply chain disruptions may also remain key challenges for the industry to navigate.

Overall, the logistics sector must continue to adapt and innovate to stay competitive. Companies can be successful despite the challenges of the Chancellor's Spring budget and other external factors. This can be achieved by leveraging new technologies, investing in employee training, and seeking out new opportunities.

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