Fleet News

Budget 2020: Fleet industry reacts to the Budget

Rishi Sunak with Budget briefcase

In what was a Budget that will impact fleet operations for years to come, the fleet industry has broadly welcomed the measures outlined by the Chancellor.

New company car tax rates, a freeze in fuel duty, changes to Capital Allowances and VED were all included in Chancellor Rishi Sunak’s first Budget.

Read how the fleet and leasing industry reacted to the measures announced.

Caroline Sandall, chairman of fleet representative body ACFO, said: “Fleet decision-makers and company car drivers will be applauding one of the most up-beat Budgets for the industry for many years.

“The hugely welcome, but surprising, freeze in company car benefit-in-kind tax rates for 2023/24 and 2024/25 at 2022/23 levels could provide a significant boost in demand for what remains one of the nation’s favourite employee benefits.

“Company car demand has been hit in recent years by year-on-year increases in benefit-in-kind tax and long-term rate uncertainty.

“However, the fact that rates are now known for the next five financial years - a full vehicle replacement cycle - gives planning confidence to both fleet decision-makers and company car drivers.

Sandall explained: “Businesses and drivers have also been opting out of company cars, because tax rates were not known for the full duration of the operating cycle.

“ACFO has continually called on the Government to recognise that fleets now operate company cars over typically four and five years.

“It seems that HM Treasury has listened to ACFO’s voice and not only is the five-year notification hugely welcome, but so is the freezing of rates in the final two years - for one of the first occasions in living memory.

“Overall, in almost 30 years working in the fleet industry, Budget 2020 has delivered the most welcome news to the sector that I can remember.”

The Government has pledged to end the sale of new petrol, diesel and plug-in hybrid vehicles by 2040 and in all likelihood earlier, perhaps 2035 or even 2032.

Therefore, it is imperative that fleet decision-makers and company car drivers focus on moving towards operating and driving 100% electric vehicles.

“Extension of the plug-in car grant will aid that move as will the tweak to capital allowances,” said Sandall. “However, ACFO awaits with interest to see the fine detail of exactly how the £500 million available over the next five years to support the roll-out of a fast-charging network for electric vehicles, ensuring that drivers will never be further than 30 miles from a rapid charging station, will be spent.

“Added to the continuation of the freeze in fuel duty and hundreds of millions of pounds to be spent on improving the road network and filling in potholes, Budget 2020 will, ACFO believes, go down in history as one of the best for the fleet industry in recent years.”

Read more from ACFO on changes to the plug-in grant by clicking here.

Claire Evans, head of fleet consultancy at Zenith said: “The Chancellor set out wide-ranging measures that will help businesses and consumers maximise move to electric and alternative-fuelled vehicles with increased certainty.

“Significantly, the extension of plug-in grants to 2022/23 and the removal of the expensive car supplement for EVs from April 2020, which equates to £27 a month at current rates.”

Along with the fiscal incentives, Evans says it was good to see an increase in infrastructure investment with a total of £1 billion promised to fund green transport solutions, and £500 million to support the rollout of new rapid charging hubs so that drivers are never more than 30 miles away from being able to charge up their car.

“The Chancellor’s announcements will be welcome by fleet operators as it helps them address their bold ambitions to transition to cleaner technologies and provides drivers with the reassurance they need when adopting electric vehicles for the first time,” she said.

Helen Cope, fleet consultant at Lex Autolease, also welcomed Government funding for charging infrastructure. 

"Lack of charging infrastructure is still one of the main stumbling blocks for consumers thinking about making the move to an EV, so the decision to increase the funding available for rapid charging hubs is a welcome step in the right direction," said Cope.

"However, incentivising workplace and domestic charging points need to remain firmly on the agenda."

Matthew Walters, head of consultancy at LeasePlan UK, welcomed new company car tax rates and labelled them “historic”.

He said: “For the first time, the cleanest vehicles will pay no company car tax at all, and we now know that the rates will be frozen at their 2022-23 levels until 2024-25. This is the clarity we have demanded for years.

“The system of Vehicle Excise Duty has also been changed to encourage cleaner motoring: zero-emission vehicles will be exempted from the ‘expensive car’ supplement.

“It’s less good news that, in a few short weeks’ time, VED will be uprated in line with inflation – but, given that the Chancellor has also frozen Fuel Duty for another year, we cannot complain too loudly. This Budget was kinder than fleet professionals might have expected.”

ICFM chairman Paul Hollick highlighted how it has been dubbed the ‘Coronavirus Budget’ by many, but for fleet decision-makers and company car drivers it was a good news statement that could spur company car demand.

“The Chancellor stamped on speculation that suggested that it would be the Budget that brought to an end the decade-long fuel duty freeze,” said Hollick.

“However, beneath that headline which the national media will focus on, was a Budget that clearly drives fleets and company car drivers further along the ‘green’ road and that essentially means 100% electric vehicles.

“A surprising decision to freeze company car rates for 2023/24 and 2024/25 at already announced, and now confirmed, 2022/23 rates means that fleets and company car drivers can plan for the long-term.

“With company car benefit-in-kind tax rates now known for a full five-year vehicle cycle, which is the norm for some organisations, the Budget could even herald a resurgence of the company car. That’s because many drivers’ decision to opt out of a ‘favourite’ employee perk was driven by tax uncertainty.

“I would have liked the Chancellor to have bowed to leasing company pressure and extended the same 100% capital allowance relief to them as is enjoyed by outright purchase fleets.

“However, overall with the investment in the road network, hundreds of millions of pounds for to support the roll-out of a fast-charging network for electric vehicles and confirmation that the plug-in car and van grants would be retained at least until to 2022/23 it was a welcome Budget Statement.

Mark Sinclair, chief financial officer at TMC, said it was good to hear a Budget that is more supportive of the key role business vehicles and their drivers play in growing the economy than the industry had seen in the past few years.

“The Chancellor may have felt a temptation to take advantage of the dip in pump prices to raise fuel duties, but keeping them frozen was very much the right response in the circumstances.,” he said.

“And as the industry prepares for the initial costs of transitioning to electric energy, it is good news to see company car tax being frozen for another two years to 2024/25.

“On infrastructure, the additional funding for charging networks, roads and transport to reduce congestion, improve mobility and encourage fleets to take-up zero emission vehicles is very welcome.

“We'll have to wait to see how many of the budget measures really are new money but at least there now looks to be a very welcome extra £500 million a year dedicated to fixing potholes and resurfacing.”

Peter Golding, managing director of FleetCheck, said: “The main thrust in this Budget is largely about trying to keep the economy on the rails through the threat of coronavirus.

“If we do end up with an epidemic that has a wide-ranging impact, it will clearly have a direct effect on the fleet sector.

“Overall, there will be much less business travel and the journeys that are undertaken will probably need to be potentially quite closely managed from the point of view of spreading infection.

“Whether anything the Government promises can completely mitigate the effects of such a scenario is doubtful but they are at least taking the issue seriously.”

Zipcar's general manager James Taylor believes the decision to extend the plug-in grant on electric cars until 2022-23 is “crucial” to lowering carbon emissions.

“The growth demonstrated in the electric market reveals a consumer demand for sustainable urban travel, but to make sure this is widespread, EVs must be affordable and accessible for all,” he said.

“The £500m pledge against EV charging hubs will support the key role that car-sharing companies play in making electric vehicle use the norm.

“The commitment to providing more charging hubs and the grant extension will help allow us at Zipcar UK to achieve our long-stated vision to have a fully electric fleet in the UK by 2025, providing members with convenient, environmentally friendly transport."

David Brennan, CEO of Nexus Vehicle Rental, says that in the light of Coronavirus the Budget highlights the need for businesses to remain flexible, agile and adaptable.

He also welcomed the Chancellor’s announcement that there will be a £500m investment in the charging hub roll-out for electric vehicles.

He said: “It has been clear for some time that the UK’s infrastructure requires further support to propel businesses and consumers towards the adoption of greener mobility solutions.

“Until this improved EV infrastructure is in place, we also welcome the continued freeze on fuel duty.

“Whilst committed to supporting businesses transition to greener mobility, we recognise that for those operating fleets, this has a huge impact on their bottom line and we are glad that the government continues to act in a way that protects the transport and logistics sector, which is critical to our national economy.”

Tim Meadows, VP and commercial director at Epyx, said: “We’re obviously heading into potentially uncertain times while we wait to see the level of disruption caused by the potential pandemic become clearer.

“How this impacts fleets is quite difficult to say as yet. Clearly, there could be disruption in some kinds of business travel but conversely, there may be an increase in areas such as home deliveries.

“The fleet industry has an enviable track record in showing flexibility by tackling problems in a pragmatic and effective manner, and this approach may prove invaluable during the rest of 2020.”

David Savage, regional manager for the UK and Ireland at Geotab, also welcomed the Government’s incentives for driving EV adoption in the UK.

“The increased charging infrastructure along with tax reductions and consumer incentives for electric vehicles will certainly make the switch an easier decision to make,” he said.

“Over the coming months and years, Geotab would like to see how the Government translates this into the business sector – further enabling entire fleets to help the UK hit its climate objectives.

“Yes, larger scale production of EVs will aid, but the incentives and subsidies must be on a par. Only when you have both businesses and the individuals working together to a common goal will the UK’s green transport transformation be truly realised. We eagerly anticipate the Office for Low Emission Vehicles’ review.”

Phil Jerome, managing director of Meridian Vehicle Solutions, said: “What we are seeing is an impressive investment in the future of roads in the UK that underlines a long-term commitment to road transport. This is probably not what the headlines will show though. Instead, it is all about how we manage the next few months.”

Richard Hipkiss, MD of Fleet Operations, said that new company car tax rates would allow fleet operators to finally put the wheels in motion in terms of cost-planning and procurement.

“The Government is also taking a sensible approach in their move to be green.  Although the switch to ultra-low emission vehicles is still high on the Government’s agenda, there is recognition that this will take time and a balance must be found. 

“The fuel duty freeze will help keep a lid of fuel costs for drivers in the short term, allowing for a less disruptive adjustment period that will help ease the pressure on fleets.”    

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