Paul Holland, managing director for UK/ANZ Fleet at Fleetcor, including UK brand, Allstar, on the Autumn Statement and what’s needed now in the Spring Budget.

Paul Holland, managing director for UK/ANZ Fleet at Fleetcor

On 22 November 2023, the Chancellor presented his Autumn Statement to the nation and the news was…not as much as we expected, as a sector.

The statement contained few top-line items about transportation, infrastructure, fuel or even electricity, although reading between the lines it is possible to see how the focus on bringing down interest rates and making doing business easier will affect all companies, including their fleets.

Here, I’ll outline the updates from a sustainability perspective, the latest in fuel and what we need to see in the Spring Budget to propel momentum forward.

Some encouragement for sustainability… but more needed

One key issue was that fuel and electricity were not widely mentioned. This will be difficult for many fleets to hear: fuel remains an expensive and significant operating cost. Although the Government did earmark £2bn for zero-emission vehicle development, reform electricity grid access and support business investment which is welcome, it didn’t detail further into infrastructure or provide an update on grants to incentivise businesses to install home chargers for their employees.

After the Government recommitted the country’s goals for a net ,zero transition, we expected there to be little on sustainability, but there were next to no incentives at all for the UK’s fleets to further electrify at this stage. Similarly, there are no incentives for companies currently using diesel to switch to alternative fuels, such as Hydrogenated Vegetable Oil (HVO).

One of the other significant changes for companies that operate fleets of vehicles is that the ‘Full Expensing’ rule has now been made permanent. This means that every pound invested in eligible technology, plant or machinery is fully deductible from taxable profits – each pound spent adds up to 25p in reduced taxes. Vehicles such as vans, lorries and construction equipment qualify for this deduction – but cars don’t. For logistics companies, equipment such as pallet trucks and forklifts also qualify. This is big news for companies with aging equipment that are looking to upgrade, and in particular fleets of internal combustion engine (ICE) vehicles that could be upgraded to electric drivetrains or alternative fuels.

Fuel prices are down but can the Government support further?

Moving away from EV and sustainability for a second, the other key area to explore is the latest in fuel pricing. As a company, we monitor the price of fuel and we’ve viewed the market fluctuations to analyse how this impacts drivers and fleet operators.

Today, fuel prices are far from the record highs they reached in 2022, when petrol was 191.53p per litre and diesel 199.05p. In fact, following falls across the market recently, they are roughly 130p for petrol and 136p for diesel, almost 32% reductions on July of 2022, and they could fall even further in the weeks ahead.

But we should be cautious in thinking that high fuel prices are gone. A sustained price point between £1.20 and £1.40 per litre might be easier for drivers to live with but we know oil is a volatile commodity and there may still be movement and factors that will impact price before the year is out.

The Government has a significant effect on fuel prices, as both fuel duty and VAT make up the lion’s share of the price at the pump. Whilst the Spring Budget retained the 5p per litre fuel duty cut, given recent market movements, we didn’t see any further cuts in the Autumn Statement. That said, we may well see further fluctuations as a result of the pound-to-dollar exchange rate, perhaps additional changes to OPEC’s supply and a further fall in demand, which has caused the price fall recently.

While fuel wasn’t covered in the Autumn Statement, we’ll need to monitor what the Chancellor announces in due course and how this will impact some of the fundamental costs within the price. Clearly, at some point the Government will need a robust, alternative way to replace its diminishing fuel duty.

What the sector needs in the upcoming Spring Budget

With the Autumn Statement behind us and the Spring Budget only a matter of months away, there are three factors that are currently driving the use of EVs, even when the Government has taken steps that appear to de-incentivise them (delaying to 2035 for the ban of new petrol and diesel vehicles): price, sustainability and flexibility.

These three factors drive what we would want to see from the Treasury in the next budget:

• Fuel prices need to go down: whether fleets use petrol, diesel, electricity or, as is increasingly likely, a combination of all of the above, they are all reporting that the prices they pay at the plug or pump are eating away at their profits. While the Government doesn’t control fuel prices, it could be doing more to bring them down.
• Infrastructure still needs support: Despite the huge rise in the number of EV charging points in the UK, there is less support for alternative fuels, which can significantly improve the sustainability of the UK’s fleets, especially those that use HGVs that cannot use electric charging.
• Help for small fleets: Although a significant number of larger fleets are already using EVs, smaller companies often lack the ready cash to buy EVs. These smaller fleets make up a significant number of the vehicles on the road, so giving them incentives to be more flexible with the kinds of vehicles they use would make them more competitive and drive growth.

Overall, this wasn’t the transformative statement that the UK’s fleets have been hoping for, and we can only hope that when the Spring Budget is revealed that there will be better and more inspiring updates for our industry as we all work towards sustainable mobility.