Building contractors are calling on the Treasury to delay the removal of the red diesel rebate in the face of rapidly rising fuel costs.
Trade body, the National Federation of Builder industry, said three unprecedented events in Covid-19, the energy crisis and the war in Ukraine have made all energy increasingly unaffordable.
In diesel, the price shift will be considerable and comes at a time when even the tiniest shifts in prices can put businesses in jeopardy, warned the trade body.
It call is echoed by the Road Haulage Association which has told Chancellor Rishi Sinak that many small hauliers could go bust.
Richard Beresford, chief executive of the NFB, said: “The Government has limited control over the annual price increases of gas and electricity, which in the last year have gone up by 29% and 13% respectively but in the red diesel rebate, it has the power of deferral, so that industry pays a 47% increase on pre-pandemic fuel costs, rather than 191%.”
“These are unprecedented times and after rejecting industry pleas on minimal exemptions for plant vehicles that could not be electrified, such as mobile cranes, this policy change arrives in the middle of a perfect storm on British energy costs and so a twelve-month deferral on removing the red diesel rebate is pragmatic.”
UK construction has seen five climate-related regulatory changes in the last twelve months, all coming with specific tax increases.
Beresford warned that fuel and vehicle decarbonisation was a complex challenge, currently at the mercy of computer chip shortages, stifled production of biodiesel, and international competition for fuel.
“The perfect storm isn’t just the price of UK energy. Due to Covid-19, the worldwide shortage of semi-conductors that electrified plant machinery requires won’t start improving until 2023 and biodiesel production is still below pre-pandemic levels, which with a 16.5% lower wholesale price than at the pump diesel was expected to help absorb price rises.
He added: “The Russian invasion of Ukraine has changed the landscape again, as countries who import from Russia, such as the US who pre-war doubled their Russian oil imports, are purchasing elsewhere, along with all other nations.
“This competition for fuel will also hit the already fluctuating biodiesel market, which at one point saw biodiesel cost 11% more than pumped diesel, with export and import levels jumping wildly every month.
“Given the huge uncertainties, the Government could still make progress on its intention to remove the rebate by doing so gradually over a period of five years and allowing companies to adjust, plan and adapt over the mdium term, rather than forcing this drastic cliff-edge they currently face.”