Logistics UK urges fuel-duty freeze to protect £87bn cargo contribution

By Nathan Brooks

£87bn of UK gross value added depends on air cargo, according to Logistics UK, which is pressing the government to keep fuel duty at its current rate, including the 5p cut.

The industry group says cargo meets “just in time” demand for high-value goods and growing e-commerce needs. It puts its fiscal case bluntly: “maintaining the current rate of fuel duty, including the 5p cut is key.”

Logistics UK puts wider logistics at more than £1trn in annual trade and 2.6m jobs, moving goods and materials for housebuilding, infrastructure, hospitality, retail, manufacturing, defence and exports.

The group says logistics is driving the early economic recovery, and its own research shows business confidence beginning to improve. The sector's reach also links it to the government's goals for growth in every postcode, regional reindustrialisation and the crisis among young people not in employment, education or training.

How much room is left at UK airports?

Logistics UK says most UK airports operate at or near total capacity, while the sector handles 2.8m tonnes of freight each year. Freight in passenger-aircraft belly holds gives carriers flexibility, but that capacity depends on passenger schedules and the commercial viability of routes.

The group backs a third runway at Heathrow Airport to strengthen supply-chain resilience and reduce disruption. Heathrow is Britain's largest port of entry and exit by value of goods, handling almost £300bn of cargo annually.

Logistics UK expects the expansion to boost trade and make international connections easier for UK businesses. That would add resilience to a system in which cargo capacity can move with passenger demand rather than freight volumes alone.

What would fuel volatility cost?

The cost of filling a heavy goods vehicle with diesel has risen from around £280 to more than £1,000, Logistics UK says. With 80% of UK freight using the road network at some point in its journey, that change reaches almost every supply chain.

Fuel accounts for roughly one-third of an HGV fleet's running costs. Higher fuel duty can weaken business viability, alter investment decisions and pass through supply chains into consumer prices, the group says. Jet fuel prices have also risen sharply since the conflict began.

The Middle East conflict has shown how events outside the UK quickly become higher costs for businesses and consumers through fuel prices and shipping disruption. Logistics UK says the conflict is not over, and diesel prices hit a record high at the end of September.

Can tax policy keep investment moving?

England and Wales's industrial sector, which includes a significant proportion of logistics businesses, paid more than £7.5bn in business rates in 2023, before April's increase for warehouses, according to Logistics UK.

Logistics UK calls warehouses, distribution hubs, freight terminals and airports critical national assets but argues that the property-tax regime discourages investment. Its three recommendations to ministers are specific:

• Maintain fuel duty at the current rate, including the 5p cut.
• Reform business rates to encourage investment in warehousing, freight infrastructure and supply-chain productivity.
• Include logistics in the British Industrial Competitiveness Scheme (BICS) to reduce electricity costs as battery vehicles become more prevalent.

The BICS proposal would remove policy costs from business electricity bills. Logistics UK says UK industrial electricity ranks among the most expensive in the world.

Lower bills would help operators electrify fleets, support decarbonisation and preserve international competitiveness. Cheaper, more resilient logistics would also support industrialisation and ease pressure on household costs, the group says.

The group is asking the Chancellor for “a cost-competitive business environment” to convert improving confidence into sustained trading.

What has government already done?

The government's industrial strategy recognises logistics' contribution to the economy and to the competitiveness of growth sectors, Logistics UK says. The previous government provided a £250m package for the effects of the Middle East conflict.

That package included an ongoing fuel duty freeze, vehicle excise duty concessions and red diesel price controls for rail freight. Logistics UK also points to Keir Mather MP's appointment as Minister for Maritime, Aviation and Logistics, and the expansion of his remit, as evidence of a wider government focus.

For cargo operators, the next measures to watch are the fuel-duty freeze, April's business-rate increase and Heathrow's third runway; together they will frame whether improving confidence becomes sustained investment, capacity and trade.