Kevin Minton is chief executive of the Construction Plant-hire Association
The Spring Budget is rapidly approaching and, as the largest trade association for the construction plant-hire sector in the UK, we urge chancellor Jeremy Hunt to empower the industry and create the economic conditions we need to secure our future prosperity.
“Heavy-duty vehicle and construction-plant fleet operators are hindered from adopting higher blends of renewable diesel by economics”
We represent more than 1,800 companies that are responsible for 85 per cent of the construction plant used in the UK. The removal of the red-diesel rebate in April last year, combined with the rise in fuel prices, has undoubtedly had an impact. While prices have stabilised, high levels of inflation and wider economic uncertainty have contributed to a challenging year for our members.
Last month, the government announced three new departments had been formed: the Department for Energy Security and Net Zero; the Department for Science, Innovation and Technology; and the Department for Business and Trade. This was welcome news, as the new departments provide a fresh opportunity to focus on key issues for our sector, namely competitiveness, decarbonisation, and the ability to invest in new machinery and technology. These departments must consult with industry and make progress straightaway – action is needed now.
In our letter to Mr Hunt, we urged the Treasury to consider five areas. The first relates to the super-deduction allowance (SDA), which was originally intended to get industry investing in the latest, cleanest equipment and help spur post-COVID economic recovery. In reality, the SDA, as framed, brought only limited benefit to the plant-hire sector, and it is due to expire in March. We encourage the Treasury to introduce a replacement that fully includes our industry. Encouraging and incentivising businesses to invest will be key to avoiding a prolonged recession.
Secondly, we have urged the chancellor to consider a rebate for hydrogenated vegetable oil (HVO) fuel for the construction sector. This would further incentivise companies to move away from fossil fuel-powered construction plant. As a fuel that the Treasury classifies as a heavy-duty oil, HVO is largely seen as a stopgap between the current widespread use of fossil fuels and, ultimately, net-zero emissions. The interim nature of HVO should not be used as an excuse to penalise companies that are trying to do the right thing by using HVO as part of a strategy to lower emissions now, improve air quality and limit their impact on the environment.
We are not alone in calling for a reduction in duty on HVO. A comprehensive study was published recently by Zemo Partnership, an independent non-profit partnership, originally established by the government in 2002 to shape future policy, provide expert advice and combat climate change. The report, Decarbonising Heavy Duty Vehicles and Machinery, identifies that heavy-duty vehicle and construction-plant fleet operators are hindered from adopting higher blends of renewable diesel by economics. Operators find it challenging to switch to a low-carbon solution that is currently up to 50 per cent more expensive than fossil diesel. A fiscal incentive linked to fuel duty and the greenhouse-gas (GHG) performance of renewable fuels was identified by stakeholders as the key mechanism to deliver a financial benefit while encouraging GHG-emission savings.
We also urge the Treasury to keep in place the 2022 cut in fuel duty and resist calls to raise it back to its previous level. Historically, fuel prices remain high, with inflation set to stay high for the large part of 2023.
Our fourth point relates to construction as a key driver of economic growth. In a challenging economic environment, where confidence remains fragile and business investment levels are low, it is vital the government remains fully committed to existing projects such as HS2 and Hinkley Point C, but also further planned infrastructure schemes – especially those that will be essential to decarbonise road transport and other industries.
Finally, we urged the government to publish its response and act on the findings of the Chris Skidmore Net-Zero review as soon as possible. The review has clear recommendations and actions. With industry already working towards a range of targets set by government, time is running out for further action.
We are now some 18 months away from the next general election. As thoughts turn towards the political landscape beyond 2024, it is vital that we see politicians from all sides working together to create the economic and political stability needed for our members to invest and grow their businesses.