The Association of Fleet Professionals (AFP) says that “businesses need better” after the pound plunged against the dollar yesterday (Monday, September 26) following the Government’s mini-Budget.

With Chancellor Kwasi Kwarteng pledging more tax cuts over the weekend on top of Friday's mini-budget, when he announced the biggest tax cuts for 50 years, the pound fell to $1.03 on Monday, before stabilising at $1.08.

The Treasury’s plans will require a hike in borrowing and investors are concerned about the country's ability to meet that debt, which has seen the cost of repaying that debt soar.

A weaker pound also makes imports and goods priced in dollars, such as oil, much more costly and risks fuelling price rises at a time when UK inflation is at its highest for 40 years.

The Bank of England said it would make a full assessment as to whether it should change interest rates at its next meeting on November 3, following speculation it might have intervened earlier.

AFP chair Paul Hollick said: “In just a matter of days since the new prime minister and chancellor put their economic ideas into effect, we have seen the markets become deeply disorderly with just about every credible economic commentator saying more will follow.

“It’s a situation where exchange rates are falling, bond interest rates are shooting up, inflation is likely to continue to increase and interest rates will be forced to rise. This will help create a scenario in which fleet managers will be tested to the extreme.”

Hollick says that it is likely fleet operating costs will increase from parts to servicing to the vehicles themselves.

“The cost of transporting people and goods therefore looks set to rise substantially,” Hollick continued. “Perhaps only petrol and diesel prices will fall in the coming year but even that is not certain.

“The Government argument against this backdrop might be that the growth for which they are aiming will outpace the pain we are seeing.

“I would very much be very pleased to be wrong here, but it seems unlikely that will be the case given the evidence so far.”

The fleet and leasing industry had broadly welcomed the Chancellor’s tax cutting measures on Friday, following his statement to Parliament.

However, they urged the Government to take further action that will help accelerate fleet transport decarbonisation and the road to zero. 

The AFP says it wants to see growth and recognises its importance but that can only come against a backdrop of relative strength.

“Fleets and the businesses they serve need stability,” Hollick added. “We do not currently have that.

“The fleet sector is an essential part of industry in the UK and, as its trade body, we do not take a political stance. This is not a political comment. But our businesses need better.”

The Chancellor has announced the Budget proper will take place on Friday, November 23.