UK logistics sector dodges Budget bullet as fuel duty rise scrapped

Chancellor John Healey has scrapped a planned 5p-per-litre fuel duty increase, delivering an immediate cost reprieve to UK hauliers already paying an extra £385 per week for diesel. In his first Budget under the new Burnham government, Healey rowed back on plans to raise fuel duty by 3p per litre in January, followed by a further 2p in March, easing pressure on supply chains that have warned for months of mounting inflationary strain.

The announcement keeps in place the existing 5p-per-litre fuel duty cut and pairs it with a decision not to raise business rates on large warehouses — two measures that together define the Budget's commercial footprint for the freight sector. Logistics UK chief executive Ben Fletcher called the fuel duty move "a wise decision" that would help keep trade moving, support economic growth and avoid adding to existing inflationary pressures.

"We are delighted that the Chancellor has listened to Logistics UK's strong case for maintaining the duty cut at a time of global uncertainty and rising costs for businesses and consumers," Fletcher said.

What does the freeze mean for operators?

For road haulage, the freeze halts a cost trajectory that the Road Haulage Association says has already bitten hard. Richard Smith, the RHA's managing director, described the freeze as "the right call" but pointed to the £385 per week in additional fuel costs operators are absorbing, at a time when 85% of hauliers report shrinking margins.

Smith was blunt about the consequences of the abandoned increase. "The RHA has been clear: a fuel duty hike is a food price hike, and with businesses and households struggling with additional fuel costs, the decision to keep prices frozen will offer some relief," he said. But he stressed that "ministers should have gone further."

The RHA's preferred remedy is targeted rather than general: a 15p-per-litre fuel duty rebate for essential users, modelled on schemes operating elsewhere. "The government can still support our sector as critical national infrastructure. A 15p per litre fuel duty rebate for essential users, similar to schemes elsewhere, would provide cashflow support, keeping many more haulage, coach and van operators in business," Smith said.

Why warehouses also escaped pressure?

The UK Warehousing Association greeted the business rates decision with visible relief. Chief executive Clare Bottle called it "a bullet dodged" after weeks of concern that property taxes on large warehouses would rise.

"The UKWA has led the charge to persuade the government that a rise in property taxes for warehouses would inexorably lead to higher costs for business and consumers, and we are pleased our argument has been heeded," Bottle said.

Her warning, though, was structural. Seven in 10 large distribution warehouses remain subject to the high-value business rates multiplier, even as operators face rising fuel and employment costs. Bottle also criticised policies that leave businesses outside favoured sectors at a competitive disadvantage.

How are forwarders reading the wider picture?

Metro Shipping offered a cautiously optimistic assessment, welcoming the more resilient growth forecasts and the removal of import tariffs on more than 100 products. "Whether the wider optimism translates into stronger trading conditions remains to be seen, but global container volumes are already setting new records," the company said in a statement.

The Budget therefore lands as a holding action rather than a rescue. Fuel duty stays frozen and warehouse rates stay flat, but the underlying cost base — diesel, labour and property taxes on the majority of large distribution sites — continues to rise, and industry bodies are expected to press the case for a targeted essential-user rebate as the government's fiscal position allows.