UK logistics seeks fuel-duty freeze as freight costs surge

By Tom Whitfield

The cost of filling a heavy-goods vehicle with diesel has climbed from about £280 to more than £1,000, giving Logistics UK a direct case for protecting the current fuel-duty rate and its 5p cut.

Logistics enables more than £1tn of UK trade every year and supports 2.6m jobs. Air cargo’s delivery of just-in-time, high-value goods and e-commerce orders supports £87bn of UK gross value added.

What does the fuel shock change for shippers?

Logistics UK says: “maintain the current fuel duty rate, including the 5p cut.” Its rationale is commercial: fuel makes up roughly one-third of an HGV fleet’s running costs, while 80% of UK freight uses the road network at some point in its journey.

That makes diesel more than a transport line item. Higher bills can weaken operator viability, alter investment decisions and pass supply-chain costs into consumer prices. For shippers, forwarders and carriers, the consequence is broad: because most UK freight touches roads at some stage, diesel shocks reach most supply chains and complicate commercial route decisions.

The pressure has a named driver. The sector has spent a difficult year dealing with the Middle East conflict and the costs it drives. Jet-fuel prices are also exposed to price shocks and have risen sharply since the conflict began, leaving air cargo operators with another volatile input.

Logistics UK’s wider message is that policy should shift toward investment. Warehouses, distribution hubs, freight terminals and airports are national assets, yet the property-tax regime can discourage the capital spending needed to expand and maintain them.

The scale is material. Even before April’s business-rate increases on warehouses, the industrial sector in England and Wales paid more than £7.5bn in business rates in 2023, with logistics a significant component. Logistics UK calls for reform so tax supports investment in warehousing, freight infrastructure and supply-chain productivity rather than discouraging the assets that carry trade.

Why does Heathrow capacity matter?

UK airports collectively handle 2.8m tonnes of freight each year, and the majority are operating at or near total capacity. Carriers have a flexible option in passenger-aircraft belly holds, but that capacity depends on passenger schedules and whether routes remain commercially viable.

That makes Heathrow Airport’s proposed third runway a resilience issue as well as a trade issue. Heathrow is Britain’s single biggest port of entry and exit by goods value, handling almost £300bn of cargo each year. Logistics UK expects the expansion to boost trade and make international connections easier for UK businesses.

For shippers and forwarders, the commercial value is more resilient air-cargo capacity when passenger schedules or disruption narrow the belly-hold option. For carriers, the constraint is commercial route economics. Logistics UK supports the runway because it sees it as a way to reduce supply-chain susceptibility to disruption.

What policy changes has Logistics UK asked for?

• Keep fuel duty at its current rate, including the 5p cut.
• Reform business rates to support warehousing, freight infrastructure and supply-chain productivity.
• Include logistics in the British Industrial Competitiveness Scheme (BICS) to “reduce the cost of electricity” as battery vehicles become more prevalent.

The electricity request follows operators’ switch to cleaner battery vehicles, which will make logistics more electricity-intensive. The UK has some of the world’s most expensive industrial electricity. Logistics UK argues that removing policy costs from business bills will help the sector decarbonise and remain internationally competitive.

Policy support already has a precedent. The logistics sector’s contribution features in the government’s industrial strategy, which Logistics UK reads as evidence that ministers are listening. A previous government’s £250m package, designed to cushion the Middle East conflict’s effects, included a continuing fuel-duty freeze, vehicle-excise-duty concessions and red-diesel price controls for rail freight.

Logistics UK also cites the recent appointment of Keir Mather MP as Minister for Maritime, Aviation and Logistics, and the expansion of his role, as evidence of logistics’ importance to economic renewal.

The economic stakes reach beyond transport. Logistics UK says logistics can support growth in every postcode, regional development, efforts to address the crisis among young people not in employment, education or training, and the government’s reindustrialisation agenda. It also moves inputs for homes and infrastructure, supports hospitality and retail, and underpins manufacturing, defence and exports.

Logistics UK reports improving business confidence in its own research and attributes early recovery signs to the wider logistics sector. It urges the Chancellor to build a cost-competitive business environment that can turn those signs into sustained trading growth. The practical test is whether policy relief arrives quickly enough to protect business viability and unlock long-term investment.

The risks are not confined to Britain. The Middle East conflict has already produced higher fuel prices and shipping disruption for UK businesses and consumers. It remains unresolved, and record-high diesel prices at the end of September underline the volatility operators still face.

None of those choices is settled. With the conflict still driving fuel volatility, continued pressure on transport costs and delayed logistics investment remain the near-term risk unless the government protects duty relief, reforms logistics taxation and expands Heathrow capacity.