Businesses are operating through tough economic times currently, no more so than those managing fleets. Paul Holland, MD of UK Fleet at Corpay, including UK brand Allstar, looks at key fleet metrics to see whether 2024 will be more or less expensive than 2023.

Paul Holland, MD of UK Fleet at Corpay, looks at key metrics to assess the fleet cost outlook for this year

Pair economic forces such as the cost-of-living crisis and recently confirmed recession with the impact of global events and there’s little wonder why in the UK costs are soaring. And when our personal spending power is limited, there is a knock-on effect for business, particularly those managing fleets.

So, with business owners and fleet managers watching every penny, what is the economic forecast for 2024 when it comes to business vehicles, fuel, electricity and will they come out on top or be tightening the purse strings once again?

Predicting prices at the pump

A year ago, the price of diesel was starting to drop following highs in 2022 at an average of 174p per litre – petrol prices were falling too and cost around 151p. They continued to do so fairly consistently ending the year at around 152p and 144p respectively. This year the big question is whether we will continue to see prices fall or if the volatility of the last two years will continue.

The recent Spring Budget saw fuel duty frozen for a further 12 months, extending the 5p fuel duty cut and cancelling any increase with inflation, which is welcome but the reality is that the average driver will save only £50 per year as a result. Ongoing global events such as the wars that continue in Ukraine and Gaza, and Russia retaining significant antagonism towards the west, contribute towards creeping prices at the pump.

Another factor is that Saudi Arabia has cut production of oil while other OPEC+ members have lowered output targets, which restricts supply and usually means higher oil, and therefore fuel, prices. Indeed, the US Energy Information Administration says it thinks oil prices should rise next year as global demand for oil in 2024 exceeds supply. How much, however, is the ultimate question.

With multiple factors already at play that none of us could have predicted, I recommend anticipating unplanned spikes in price. Assuming no additional factors contribute to instability, the best-case scenario is that prices may only rise slightly in 2024.

The greater the competition, the greater the reward for electricity prices

Electricity prices are now just as important to monitor as petrol and diesel. While the price of electricity also fell in 2023, disrupted supplies across Europe due to the war in Ukraine have resulted in inflation and higher gas prices, so it is likely they may not fall much below where they are now.

The Office for National Statistics reported that inflation was 4.2% in January 2024, even though in the year to December 2023 electricity prices fell by 15.4%. However, Ofgem, the energy market regulator, increased its price cap on domestic customer bills by 5% from 1 January 2024, followed by a fall for the three months from April, and analysts predict fluctuating prices for electricity and gas throughout the year.

It’s also important to mention the increased competition in the charging sector. The number of low-cost specialist tariffs for home charging and the number of public rapid charging hubs is likely to more than double in number in 2024. The consequence of this is more choice for EV drivers, and increased opportunity to access lower prices.

Cost of vehicles for fleets

Prices of new cars and vans have risen markedly in the past few years but this year we may see a welcome change, according to Cox Automotive’s 2024 Insight Report. It suggests that there will be a period of stabilisation in the automotive sector generally, followed by a notable rise in registrations for the next five years.

The end of the post-Brexit agreement on tariffs for non-EU battery and parts could have impacted the cost of owning an electric vehicle, however, the European Commission and the UK have agreed to extend the current rules until 2027, avoiding price hikes.

This is a win for motorists, the economy, and the environment alike. As SMMT’s chief executive Mike Hawes said, maintaining tariff-free trade in EVs will ensure consumers retain the widest and most affordable choice of models at a time when we need all drivers to make the switch. I couldn’t agree more.

Maximising fleet efficiencies

While the UK economy works to stabilise, the cost of running a fleet is undoubtedly going to be affected by pricing pressure. When this happens, there are ways to ensure a fleet is run as cost effectively as possible, such as buying fuel and electricity at the lowest prices when on the road or using home charging to lower your EV charging bill.

That being said, the outlook is far more positive than previous years and fleet costs in 2024 look increasingly stable.