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Will ULEZ choke off London’s small builders?

31 Jul 23 A measure to improve London’s air quality could see builders and their suppliers forced off the capital’s roads – and possibly out of business. Mark Smulian reports

Unless a legal challenge intervenes, the industry will know by the end of August whether one its worst fears have come true; that’s when the expansion of London mayor Sadiq Khan’s ultra-low emission zone (ULEZ) takes effect.

The new pollution-busting, carbon-saving initiative will bring in a £12.50-a-day charge on vehicles deemed not to comply with new exhaust emission limits, across the whole of Greater London. A guide issued by the mayor’s office classifies the offending vehicles as petrol vehicles over 16 years old and diesel vehicles over six years old.

It will operate all day, every day, and employ number-plate recognition, as does the capital’s long-standing congestion charge.

This article was first published in the July 2023 issue of The Construction Index Magazine. Sign up online.

Although the ULEZ does not apply to heavy commercial vehicles, they must still meet existing – and more onerous – rules with penalties of up to £300 for driving elderly diesels.

Until now the ULEZ has applied only within the clearly-marked A406 North Circular and A205 South Circular roads. But from August its catchment area will become less well-defined.

Instead of following the M25 orbital motorway around the capital’s outer fringes, it will follow Greater London’s eccentric boundary, which untidily cuts across link roads between many points outside London.

Although ULEZ warning signs are promised, few builders will immediately know where London’s local government boundaries start and end, trapping the unwary.

Until now the ULEZ has applied only within the North- and South-Circular roads
Until now the ULEZ has applied only within the North- and South-Circular roads

The Builders Merchants Federation (BMF) has accused Khan of planning measures that will damage the industry based on ignorance of how commercial vehicle fleets work.

Chief executive John Newcomb said in a strongly-worded letter to the mayor: “We believe genuine questions remain unanswered on the way you are implementing the ULEZ expansion.

“The BMF urges you to urgently reconsider. Given the strength of feeling and high level of concern expressed by individual companies (especially SMEs), trade associations and employers’ federations, and trade unions (like the GMB), the BMF believes it is wiser for you to pause and take stock of the situation.”

Newcomb said the BMF was concerned that Khan’s advisers “have no real understanding of commercial vehicle fleets – and have not allowed sufficient time for BMF members and their trade customers to make operational changes before the new ULEZ start date.

“SMEs face disproportionate costs to comply with the ULEZ – and merchants fear for the survival of some of their trade customers.”

This article was first published in the July 2023 issue of The Construction Index Magazine. Sign up online.

Among much else, Newcomb called Khan’s plans “punitive and misguided” and warned that three unwanted consequences were likely.

He said that, in particular, smaller firms faced the cost of replacing vehicles on top of tough economic pressures and would need “awkward conversations” with customers about increasing prices.

Clients might delay or cancel works because of higher prices or cost uncertainty, and smaller firms would be reluctant to work in the ULEZ area.

Even firms that intend to keep working in London would face difficulties. Transport for London estimates that there are 30,000 non-compliant vans – from all industries – in use in the expanded ULEZ area each day but the BMF said the Autotrader website had only around 5,200 compliant vehicles listed for sale in the region.

If firms working in London lacked access to new vehicles they “will have to pay more than £3,100 in annual [ULEZ] charges”, Newcomb said.

He added: “The BMF is concerned that you are pressing on regardless with the ULEZ expansion when there is insufficient availability of compliant vehicles to meet projected demand.”

Khan has offered a £110m scrappage scheme to help some owners of old diesels meet the cost of a new ULEZ-compliant vehicle.

But this would assist few in the construction industry since many have no choice but to use diesel.

Even if they wished to change, the scrappage deal applies only to people on lower incomes, those who are disabled, firms with fewer than 50 employees and sole traders.

Other industry bodies have much the same hostility to the ULEZ. Brian Berry, chief executive of the Federation of Master Builders, says: “The FMB fully supports a cleaner environment, but this shouldn’t be at the expense of those arguably least able to pay.

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This article was first published in the July 2023 issue of The Construction Index Magazine. Sign up online.

“To support tradespeople with non-compliant vehicles, either they [should be] given a transition period or a grant to help them buy a new vehicle to enable them to still work.

“We need more builders working, and not fewer, at a time when we need to get the economy back on its feet. The impact will be that builders will be put off going into London, which means fewer builders available to do the work and the London economy suffers.”

Rico Wojtulewicz, head of housing and planning policy at the National Federation of Builders, says: “London is already a difficult place for smaller builders to win a pipeline of work and keep businesses profitable, and with 49% of builders being self-employed, the ULEZ expansion is particularly painful for our sector.

“Newer entrants to the industry will find it particularly difficult, as they are most likely to rely on older, more affordable but ULEZ non-compliant vehicles, but the impact on more established businesses is great too, as the competition for second-hand ULEZ-compliant vehicles has become fierce.”

 The Builders Merchants Federation says that merchants and their customers have not been given enough time to prepare for the ULEZ expansion
The Builders Merchants Federation says that merchants and their customers have not been given enough time to prepare for the ULEZ expansion

Wojtulewicz said there were suggestions that builders should simply price-in the cost of ULEZ when calculating estimates, but he said: “London is still an industrial centre; buying tools, materials and parts from smaller specialist suppliers and builders’ merchants in the ULEZ zone is an added, sometimes unpredictable cost. This is causing some builders on the fringes of the ULEZ to avoid entering it.

“Where they can, some companies and workers are trialling cargo bikes but it’s not a sustainable solution for the sector and it limits their opportunities.”

The construction industry’s capacity is essential to Khan’s objectives to build more affordable homes and regenerate parts of London, but despite this pressure he appears unmoved.

His spokesperson says: “The mayor has been clear that the decision to expand the ULEZ London-wide was not an easy one, but necessary to tackle toxic air pollution and the climate crisis.

“Around 4,000 Londoners die prematurely each year due to toxic air pollution, children are growing up with stunted lungs and thousands of people in our city are developing life-changing illnesses, such as cancer, lung disease, dementia and asthma. Expanding the ULEZ London-wide will enable five million more Londoners to breathe cleaner air.”

This article was first published in the July 2023 issue of The Construction Index Magazine. Sign up online.

Khan’s spokesperson points to the scrappage scheme, recently expanded from micro-businesses to slightly larger ones..

“The mayor continues to call on government to further support the switch to cleaner vehicles through funding a targeted national scrappage scheme or providing additional funding to London as it has done for other cities across the country,” the spokesperson adds.

ULEZ expansion could deter small businesses from entering the city
ULEZ expansion could deter small businesses from entering the city

The industry’s last hope probably lies in politics and the law. Sutton Council has raised a 5,000-signature petition against ULEZ expansion and a group of other councils has been granted a High Court challenge.

This judicial review will examine whether Khan complied with statutory requirements and whether he properly considered the scrappage scheme.

The action has been brought by the London boroughs of Bexley, Bromley, Hillingdon and Harrow, as well as Surrey County Council.

Bromley leader Colin Smith says: “There is still time for the mayor to pull back and take a more considered approach which takes outer London’s differing needs and circumstances into account and I call upon the mayor publicly once again to do precisely that, not just for the good of due process, but most of all for the benefit of all those threatened by the horrendous daily cost of his proposed tax, particularly upon those least able to pay.”

Surrey leader Tim Oliver says: “Our consultation response in July 2022 clearly highlighted that the mayor’s decision, in failing to include Surrey residents in any scrappage scheme, was unacceptable”. Surrey has proposed a number of other recommendations to help mitigate both the financial and potential environmental impacts of the expansion, says Oliver. “Our concerns have not been addressed by the mayor.” 

Surrey residents might indeed have cause for concern since – as pointed out in earlier ULEZ research by consulting engineer Buro Happold – affected businesses might relocate just outside Greater London in areas whose air quality is no better. “Ultimately, this does not decrease the air quality impacts of their operation, it merely displaces them,” observed Buro Happold.

ULEZ expansion is targeted at polluting vehicles, not at builders as such, but they are caught in a problem not of their making as the need to clean London’s air clashes with the need to grow its economy.

Industry arguments have so far failed to move Khan. Perhaps the courts will.

Companies count the cost

  • The BMF provided London mayor Sadiq Khan with examples of the impact of the ULEZ expansion on a sample of anonymised members.
  • Company A said up to 40% of staff would be affected, costing them an extra £3,000 a year each
     
  • Company B thought 2,000 people would be hit – a ninth of its staff.
     
  • Company C estimated that a potential 30% of its staff in 13 branches would be affected
     
  • Company D calculated that to meet the extra £3,000-a-year cost staff would require gross extra earnings of £4,000 or would see the equivalent of a 14% pay cut through ULEZ charges.

Sadiq Khan’s plan to clean London’s air could clash with his promise to grow the city’s economy
Sadiq Khan’s plan to clean London’s air could clash with his promise to grow the city’s economy

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