I am writing on behalf of leaders from across the UK construction and plant-hire sector to
welcome the Government’s decision to maintain the fuel duty freeze – and to urge the
Treasury to go further before rising fuel and energy costs place even greater pressure on the
construction supply chain needed to deliver Labour’s 1.5 million new homes and wider
infrastructure ambitions.
Worth £14 billion to the UK economy and supporting over 191,500 jobs, plant-hire is the
backbone of the construction industry – generating £218 for the wider economy for every
£100 we produce. We are the most capital-intensive sector in the UK economy, with around
26p of every £1 reinvested into plant and equipment. Over 95% of our members are SMEs,
many family-run, making long-term investments in people, apprenticeships and the
communities they serve – businesses built to last, not to extract.
The government’s decisions to increase National Insurance contributions, raise the minimum
wage and reform inheritance tax have landed simultaneously, at pace, on firms already
navigating weak pipelines and rising input costs. Individually, each might have been
absorbed. Together, they have pushed many family firms to the edge. Our latest member
survey shows 76% say recent tax changes have reduced their investment confidence, and
42% are pessimistic about the outlook over the next 12 months. Firms are deferring
investment, cutting apprenticeships and scaling back hiring at the precise moment they are
being asked to deliver at greater volume and pace.
Against that backdrop, rising fuel and energy costs represent a further blow that a significant
number of firms will not survive. 66% of our members cite energy costs as one of the most
acute pressures facing their business. For a capital-intensive, fuel-dependent sector, there is
no easy substitution and no margin left to absorb what is coming.
We are therefore calling on the Treasury to introduce two targeted, time-limited measures:
First, rather than postponing a freeze, the industry needs a temporary reduction in fuel duty,
sustained for a minimum of 12 months, focused on commercial and off-road diesel used in
construction and plant-hire operations. This is not a generalised ask for permanent tax relief.
It is a targeted intervention to stabilise a strategically important supply chain during a period
of exceptional global cost pressure.
Second, a temporary removal of VAT applied at the pump for fuel-intensive commercial
operators, structured to benefit SME businesses in construction, logistics and agriculture that
cannot pass costs on and have no practical alternative to fossil fuels at this stage of the
energy transition.
These are not novel asks. In April, the Irish Government introduced excise duty reductions
on petrol, diesel and marked gas oil, alongside targeted relief for fuel-intensive sectors,
explicitly recognising that sustaining construction, logistics and agriculture protects supply
chains, supports infrastructure delivery and sustains employment. France, Germany and
several other European economies have adopted similar approaches during periods of
energy cost volatility. The UK now risks being the outlier, absorbing the competitive
disadvantage while our trading partners act.
The consequences of inaction reach well beyond our industry – and directly into the living
standards Labour was elected to improve. Inaction risks worsening housing affordability,
suppressing regional growth and hollowing out the supply chain capacity Britain will need for
years to come. Once that capacity drains away, it does not return quickly or cheaply.
The prize, by contrast, is substantial. Oxford Economics analysis found that improving
infrastructure delivery could unlock £315 billion for the UK economy over 15 years. But it
requires a functioning, well-invested supply chain to deliver it – and right now, that supply
chain is contracting at the very moment it needs to be growing.
Britain cannot improve living standards, modernise its infrastructure or solve the housing
crisis without a strong and confident construction supply chain behind it. We stand ready to
work constructively with the Government to deliver those ambitions – but the cost
environment must move in the same direction as the targets being set for us.
We would welcome the opportunity to work directly and collaboratively with Treasury
ministers to discuss these issues and how we can better support the sector to deliver
Labour’s growth ambitions
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