UK Logistics Sector Disappointed by Spring Budget 2017

The 2017 Spring Budget was mixed news for the logistics sector, with most industry commentators left feeling decidedly disappointed. As expected, Chancellor Philip Hammond showed little appetite for new spending ahead of Brexit negotiations and made very few investment promises for transport.

Freezes to Vehicle Excise Duty, the HGV road user levy and fuel duty were welcomed, but the Chancellor’s pledges of money to ease motorway congestion, improve road infrastructure and boost research in driverless vehicles were met with a lukewarm response at best. To many logistics industry observers, the budget was heavy on sound bites but light on substance.

In his first Budget Statement, Philip Hammond released details on how £1.3bn of new transport funding (already announced in the Autumn Statement) would be spent, including £113m to help ease motorway ‘pinch points’ in the North and Midlands and a new £690m transport fund for local authorities.

The Chancellor also announced a £270m investment in electric vehicle innovation and robotics “to keep the UK at the forefront of disruptive technology”.

Will funds aimed at easing congestion make a real difference?

As part of the £1.1bn for local transport projects already announced in 2016’s National Productivity Investment Fund (NPIF), the Chancellor unveiled a £690 million pot to tackle congestion and get “local networks moving”. £490 million of the fund will be available from autumn 2017, with money allocated to local authorities on a competitive basis.

The NPIF also included £220 million to “address pinch points” on the national road network. In his Budget speech, the Chancellor announced the first regional allocations, with £90m earmarked for the North of England and £23m for the Midlands. Details of specific projects will be announced “shortly” by the Department for Transport.

Labour MP for Stoke-on-Trent South and Transport Select Committee member Rob Flello said the Chancellor had missed an opportunity. “Surely it would be better to do some properly funded research to work out how to deal with the problem nationally rather than expect different areas of the country to effectively battle it out for pennies,” he said in a blog post “We need a road network that works properly and that means an integrated transport policy, something there hasn’t been in this country since Roman times.”

Mike Danby, CEO of logistics supplier Advanced Supply Chain, was dismissive. He told SHD Logistics News that the promised investment wasn’t enough. “Given that the government has only allocated £90m to the North of England, when a smart motorway scheme that covers only 15 miles of the M62 cost £136m, it’s clear this funding is inadequate,” he said.

New money for electric vehicles but no incentives to help operators cut emissions

The Chancellor announced £270 million to launch the new Industrial Strategy Challenge Fund, which supports research and innovation in new technology, such as the design of “better batteries for new electric vehicles that will help improve our air quality.”

Innovative UK courier ParcelHero welcomed the investment. David Jinks, Head of Consumer Research, told SHD Logistics News that “parcels are being delivered by drone in Cambridgshire, droids are delivering packages in London streets and driverless vans are being trialled in Greenwich. Britain and the US are streets ahead of the rest of the Western world when it comes to e-commerce and delivery innovation; and this money will help ensure we stay ahead of the curve.”

But other commentators criticised the lack of incentives in the Budget to help the haulage sector reduce vehicle emissions and air pollution. The Chancellor said the Government will introduce a draft plan and consultation to improve air quality in spring 2017. This includes plans to reward lower HGV vehicle emissions with a reduced HGV road user levy. The unanswered question so far is what, if anything, the Government will do to help haulage operators transition to cleaner, low-emission trucks, particularly when they’re faced with spiralling costs and shrinking margins.

Transport tax freezes not enough for the FTA

The Chancellor announced freezes to HGV Vehicle Excise Duty and the HGV road user levy from 1 April 2017, which were welcomed by hauliers, but the Freight Transport Association (FTA) was disappointed with Phillip Hammond’s extension of the fuel duty freeze, as it had asked him for a 3p per litre cut in the duty, which it said would save British hauliers around £1,400 per year on the cost of running a 44-tonne truck.

“Fuel costs now represent a third of the total cost of the operation of an articulated lorry,” FTA Deputy Chief Executive James Hookham said, “and the annual fuel bill for a 44t vehicle has risen by 39% since January 2007.” The FTA predicted that UK operators would be forced to pass increases in fuel costs onto customers, which could restrict UK growth and damage trade relationships at just the time when British trade “needs as much stimulus as possible.”

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