Aldermore, the new British challenger bank, says UK haulage firms still need fuel price parity with European countries if they are to successfully fight-off foreign competition.
Responding to yesterday’s announcement that the government is to postpone its proposed 3p price increase in fuel duty until January 2013, Damon Walford, Managing Director of Aldermore Invoice Finance, said: “The UK haulage industry remains at a significant disadvantage against European competitors, who pay as little as 106p per litre for diesel in Spain, 111p in Austria and just 96p in Luxemburg (even in Germany and France, diesel prices are significantly lower at 115p and 118p respectively)*.
“From 1st January 2013, assuming the 3p price rise still goes ahead, a litre of diesel selling for approximately 145p at the pumps will cost just 59p to produce and 5p to deliver and sell. The remainder – a whopping 81p per litre – will consist of fuel duty and VAT. The government therefore has plenty of scope to harmonise UK diesel prices with the rest of Europe.”
Walford continues: “The cost to the government of reducing fuel duty is not as high as it may at first appear. For example, the Centre for Economics and Business Research has recently** produced a report on behalf of Fair Fuel UK, which shows that a reduction in fuel duty would actually help stimulate economic recovery. According to the research, a 2.5p per litre cut in fuel duty would result in the creation of 175,000 jobs within a year and would boost UK GDP by 0.32%, resulting in no fiscal loss to the government.
“What’s more, the Office for Budget responsibility has also recently announced that the government is about to save £13bn in debt interest over the next 5 years (the amount the government has to pay in order to borrow), due to lower inflation, the decision to transfer the Royal Mail’s pension fund to the public sector and lower interest rates on government bonds. When you take this into consideration and the potential benefit to the economy highlighted by the CEBR report, aligning UK and European fuel prices is not as impossible an idea as it may at first appear.”