Construction News

Fri May 29 2020

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Red diesel axe to cost construction up to £490m a year

6 Mar Civil engineering contractors have joined the plant hire sector in lobbying the chancellor of the exchequer not to cut the rebate on red diesel.

The Civil Engineering Contractors Association (CECA) says that scrapping access to cheap fuel would cost the UK’s construction industry up to £490m a year.

CECA has written to the chancellor to outline how proposed plans to remove the rebate will negatively impact the construction supply chain, risking placing further pressures on a sector that has seen a spate of companies go out of business recently.

CECA’s letter to the chancellor follows a similar plea from the Construction Plant-hire Association.

New chancellor Rishi Sunak, it has been variously reported, plans to scrap the red diesel rebate in his budget statement next week, to encourage the use of cleaner alternatives.

Red diesel is used by contractors for off-road plant including excavators and generators, as well as exempted on-road vehicles like mobile cranes and concrete pumps. Red diesel is taxed at 46.8 pence less per litre than regular diesel.

CECA director of external affairs Marie-Claude Hemming said: “The construction sector accounts for more than half the companies that use red diesel. Removing the red diesel rebate could cost our industry between £280m to £490m a year.

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“As the construction sector’s largest customer, the government will end up paying much of this cost, as well as inflicting additional pressure on the industry’s supply chain, at a time when we need the sector to perform well and boost economic growth.

“We would welcome the opportunity to work with government and others across the industry to undertake a phased approach to the development and roll-out of lower-carbon plant across construction sites.

“As more efficient machinery becomes available, we advocate a reasonable lead-in time to give our sector – especially our SMEs – the chance to manage the increased costs and work towards cleaner air for all.

“If the government decides to proceed with the removal of the red diesel rebate, CECA will set up an emergency helpline for members to help tackle immediate difficulties. But we also call on the government to maintain this exemption in the shorter term, to prevent construction businesses from going to the wall, and allowing industry to engage in a sustainable transition to greener fuels in the coming years.”

In his letter to the chancellor, Construction Plant-hire Association chief executive Kevin Minton wrote: “Restrictions on the use of red diesel in the construction sector would, unfortunately, have a profound impact for our members and the wider construction industry by raising costs and squeezing already tight profit margins,” he wrote. “This in turn will limit scope for investment in new skills and new cleaner, greener technology – something the government is encouraging our members to do.”

He continued: “Such proposals will only undermine this progress, adding greater uncertainty at a time when construction remains fragile, despite government plans to increase spending on infrastructure. We urge you to delay any consideration of this use until a proper consultation can be carried out, and suitable amelioration measures identified.”

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