Industry leader says economy will be hit by removal of diesel rebate

The removal of the red diesel rebate in April will have a major impact on the economy, a leading construction business organisation has claimed, and called for the measure to be deferred.

On 1 April 2022, the Government will remove the red diesel rebate that several industries currently benefit from.

Red diesel can be used by construction companies to power their plant machinery. It is cheaper than road fuel thanks to a rebate of 46.81p per litre, which is taken off the full price of road fuel.

On April 1 the Government will remove the rebate and that could put businesses in jeopardy, according to the National Federation of Builders (NFB).

The NFB says the comes in the middle of a perfect storm on British energy costs and so 12-month deferral on removing the rebate is pragmatic.

The industry fears that a series of events including the COVID-19 pandemic, the war in Ukraine and a general energy crisis will make fuel increasing unaffordable and affect areas like road haulage, cold storage supply chains and civil engineers.

The Russian invasion of Ukraine has changed the landscape again, as countries who import from Russia, such as the US who pre-war doubled their Russian oil imports, are purchasing elsewhere, along with all other nations creating competition for fuel and rising prices.

Richard Beresford, chief executive of the NFB, said: “The Government has limited control over the annual price increases of gas and electricity, which in the last year have gone up by 29 per cent and 19 per cent respectively.

“But in the red diesel rebate, it has the power of deferral, so that industry pays a 47 per cent increase on pre-pandemic fuel costs, rather than 191 per cent.

“These are unprecedented times and after rejecting industry pleas on minimal exemptions for plant vehicles that could not be electrified, such as mobile cranes, this policy change arrives in the middle of a perfect storm on British energy costs, so a 12-month deferral on removing the red diesel rebate is pragmatic.”

Mr Beresford continued: “The perfect storm isn’t just the price of UK energy. Due to COVID-19, the worldwide shortage of semi-conductors that electrified plant machinery requires won’t start improving until 2023 and biodiesel production is still below pre-pandemic levels, which with a 16.5 per cent lower wholesale price than at the pump diesel was expected to help absorb price rises.”

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