Logistics UK warns fuel duty change threatens inflation surge

Logistics UK has raised concerns regarding an impending fuel duty increase set for September 2026. Acting Chief Executive Kevin Green expressed that this move by Chancellor Rachel Reeves could negatively impact economic recovery. The planned increase could add hundreds of millions in taxes for logistics firms, ultimately burdening households, businesses, and motorists.

Potential Inflation Surge from Fuel Duty Change

Green emphasized the implications of rising logistics costs on overall inflation. He stated, “Increasing logistics taxes means increased costs for everyone,” highlighting the sector’s integral role in various industries, including food, medicines, and consumer goods.

• Logistics businesses currently contribute approximately £5.5 billion annually in fuel duty.
• The logistics sector generates roughly £170 billion for the UK economy.
• It employs over 8% of the nation’s workforce.

Green urged the Chancellor to reconsider the decision, warning of inflationary pressures anticipated in spring as a result of the tax hike. This warning is echoed by Clare Bottle, CEO of the UK Warehousing Association, who noted that costs in the warehousing sector continue to escalate.

Business Challenges Beyond Fuel Duty

Bottle pointed out that rising business rates, increasing minimum wages, and escalating energy costs are major challenges facing the warehousing industry. The sector, which employs around 650,000 people, will be significantly affected during peak seasons like Black Friday and Christmas.

Both leaders criticized the notion of a tax on “online giants,” arguing that such measures could broadly impact all sectors due to the essential role warehouses play in the supply chain.

Financial Burdens and Planning Reforms

The Treasury aims to collect an additional £270 million from distribution warehouses over the next three years. This increase will likely affect high street businesses that depend on goods stored within the UK’s extensive warehouse network.

Green also mentioned that ongoing reforms in the planning system are not yielding the expected benefits. Consequently, the Office for Budget Responsibility warns that attempts to amend the Planning and Infrastructure Bill may limit available land for development.

Amid these concerns, there are encouraging developments regarding apprenticeships. The government plans to fully fund SME apprenticeships for eligible individuals under 25, although specifics remain to be finalized.

In a broader context, the government’s recent decision to remove the duty exemption for imports valued at less than £135 raises further concerns. Industry stakeholders hope this change will not impose additional strains on the logistics sector.