Thursday, November 23, 2017

UK Freight and Logistics Stakeholders React to the Autumn Budget

Mixed Reaction From Warehousing and Road Haulage Sectors
Shipping News Feature
UK – So, as the dust settles on Chancellor Philip Hammond's latest Budget so the various interests from across the logistics sector pass comment on some of the fiscal measures announced. Here we publish comments from leading lobbyists in the warehousing, road haulage and general freight sectors on a budget which engendered a variety of reactions. Technology was a winner with the Research and Development tax credit up to 12% and doubling of Enterprise Investment Scheme investment limits for 'knowledge-intensive' companies.

The VAT registration threshold remains at its current £85,000 level, and the Oil & Gas sector will be pleased at the measure which comes in next November which enables more assets to transfer ownership, currently oil and gas field owners cannot pass on their tax history to a purchaser. This limits the tax relief available if the field is decommissioned thus reducing the attractiveness of the deal. Deirdre Michie, Chief Executive of Oil & Gas UK, said:

“This tax measure should help complete deals more quickly and in a more efficient way. This is a vital step that can bring in new investment to increase recovery from existing fields and fund fresh investment which is key to generating activity for our hard-pressed supply chain. It will also help extend the lives of many mature fields and postpone decommissioning.”

Housing has of course been a headline maker recently and the Chancellor’s various strategies affecting this, raising the stamp duty thresholds, setting a house building target etc. have an obvious and immediate impact on the logistics sector succinctly addressed by Peter Ward, CEO of the United Kingdom Warehousing Association (UKWA), who commented:

“It is clear that the housing challenge is now at the top of the Government’s agenda and the plan to build 300,000 net new homes a year on average by the mid-2020s will bring challenges and opportunities to the logistics industry. The occupiers of these new homes will have to be fed and clothed and, presumably, will expect their online orders to be delivered within 24 hours, so it is essential that the needs of the freight and logistics industry are included in the new homes plans.

“The Government must factor-in the need for land to be allocated for the construction of logistics hubs to serve these new consumer communities and, to this end, UKWA was pleased to note that Mr Hammond announced several measures that should help speed up the planning process and reduce the practice of 'land-banking' which has been a key factor in exacerbating the lack of suitable warehousing property across the UK.

“Through its various advisory boards, UKWA has already been working to bring the lack of available development land and fit-for-purpose warehousing space in all cities to the Government’s attention and has presented evidence that highlights the potential crisis in prospect if this issue is not addressed. We look forward to hearing what the Secretary of State for the Department of Communities and Local Government has to say in the coming days and remain ready to work with the government on all proposals that come forward.

“Overall, I think the budget held few surprises for the logistics sector. While UKWA would have preferred the Chancellor to have cut duty on fuel, Mr Hammond’s announcement that the fuel duty rise scheduled for April 2018 is to be cancelled will be warmly welcomed by UKWA members. It will reduce the cost pressures on UK supply chains and, it is hoped, stimulate growth in the economy.

“But, against the backdrop of reduced economic growth and, of course, Brexit, the Chancellor’s words reinforce the fact that high professional standards, lean operations, innovation and a lot of hard work will remain at the core of any successful logistics operation.”

As for the carriage of freight, both the Road Haulage Association (RHA) and the Freight Transport Association (FTA) were critical, despite the unchanged level of duty on fuel, with RHA chief executive Richard Burnett pleading for another look at the situation, saying:

“At a time of Brexit uncertainty, the Chancellor had the golden opportunity to make the production and distribution of UK goods more competitive. Fuel duty makes the UK less competitive, we have the highest fuel duty in Europe, nearly 50% higher than the European average. And despite the 7-year freeze, at 57.95 pence per litre, fuel duty remains grossly excessive. It has a negative effect on everything we buy and makes all UK made goods more expensive to transport.

“We implore the Chancellor to amend his budget and introduce a fuel duty rebate scheme for essential users of fuel, a system already adopted by 8 EU member states, including our nearest neighbours The Republic of Ireland, Belgium and France. An Essential User Rebate of 10 pence per litre would enable our hauliers to gain advantage over their European counterparts and would considerably lessen the fiscal drain on our emergency services which are also in a financial stranglehold as a result of the high price of diesel. Let the sectors that work tirelessly to keep the economy moving and the population safe, well and fed be rewarded, not punished.”

The FTA is similarly disenchanted after strenuously campaigning for a 3 pence cut in the duty rate, prompting Christopher Snelling, FTA's Head of National Policy, to express disappointment on behalf of the whole of the industry, saying:

“A freeze in fuel duty is a welcome decision, but it demonstrates a real lack of ambition by the Chancellor. The cost of moving goods around the country and overseas determines the cost of doing business in Britain and the price of goods in our shops. At a time when British business is under extreme pressure to prove its credentials and reinforce existing trading relationships, Mr Hammond has missed an opportunity to cut these costs, and make the UK a more competitive place to do business.”

The FTA says its research shows the price of diesel accounts for nearly a third of the operating costs for an average 44 tonne truck. Just one penny increase in the cost of a litre can add £470 a year to the cost of running one of vehicle. Many FTA members run fleets of hundreds or even thousands of vehicles and the resultant cost of a duty rise can have a significant effect on operating margins and future solvency.

Recent data from the Insolvency Service shows the number of freight firms filing for insolvency between April and June was almost double the same period last year and has reached its highest level in five years. In the three months up to 30 June 2016, 32 UK road freight companies declared insolvency. A year later, the figure had reached 59.

Campaigning outfit FairFuelUK was more upbeat and quick to claim the credit for the stable rate with a statement saying:

“Pleased that the Chancellor has understood the debilitating effect of raising fuel duty on consumers, households, businesses and the broad economy. He knows that now is not the time for gesture politics and that’s why he’s listened to the everyday anxieties of FairFuelUK’s 1.5 million supporters and continued the duty freeze.”

As for ocean transport there were harsh words from Maritime UK which points out that the sector supports almost a million jobs and is disappointed at the Chancellor’s failure to find funding for its SMarT scheme, under which hundreds of cadets learn their craft and latterly those same men and women come ashore to continue to supply the nation with much needed skills. Whilst praising the government’s additional £3 billion to support Brexit preparatory work, it issued a statement saying:

“Without investment in the SMarT scheme, which delivers a return of £4.80 to the nation’s GDP for every £1 the government spends, UK maritime could be at risk as the country fails to support the training of future seafarers. Professional services, in which the UK currently leads the world, rely heavily upon former seafarers, whether in legal, insurance, broking or finance. With a number of maritime service companies weighing up their future in the UK post-Brexit, it is vital that further negative conditions, such as a reduced supply of skilled and experienced labour, do not add detrimentally to those considerations.”

Maritime UK, along with many others in the industry, did however praise the plan to have the National Infrastructure Commission initiate a new study into the future of freight. Covering congestion, environment and new technologies, the study is aimed at helping identify the actions necessary to increase productivity, efficiency and the competiveness of the UK’s freight supply chain.

With the recently released government figures showing a decline in productivity this, plus the intent to invest £30 million in Artificial Intelligence digital training courses, the tax relief measures for the North Sea and the various other adjustments, this has produced, according to accountants and shipping consultants Moore Stephens, 'a stable tax regime for shipping'.