*Please note: The changes discussed in this article are now in full effect.
What does the reduction mean for those who use this fuel?
From 1 April 2022, many sectors will lose their entitlement to use ‘red’ diesel and tax-rebated biodiesel in a variety of applications including manufacturing and construction. According to the Civil Engineering Contractors Association (CECA), losing the red diesel rebate could cost the UK construction industry between £280m to £490m a year.
How have FMB members helped to shape this discussion?
Since the announcement of this policy in 2020 we have been very grateful for members’ feedback on how this would play out when implemented and the impact increased costs will have on their businesses. Your comments formed the basis for our lobbying work and the FMB’s response to Government on the impact of this policy change. I would like to thank all of you who have taken time to contact us and assist with practical comments.
We have listened to your views and spoken to elected representatives, government departments, and industry stakeholders on your behalf. A recent Westminster debate led by Carla Lockhart MP, featured comments provided by the FMB and voiced your concerns. It can be viewed on-demand via the Parliamentary TV website.
BBC News also featured a joint statement from the Construction Employers Federation (CEF), the FMB, the Mineral Products Association NI (MPANI) and Manufacturing NI in an article examining the prospective business impacts of the policy.
Supporting green innovation in construction
FMB members and SME companies are leading innovators when it comes to changing the way we operate and build to embrace a greener future for construction.
The FMB has led the way in calling for a retrofit program to improve our existing housing stock and driven up standards to see more responsible and greener initiatives embraced by the wider industry.
Whilst we champion the commitment towards a greener industry, viable energy alternatives are not yet widely available.
How the red diesel rebate change could affect your construction business
Some members may not make extensive personal use of red diesel. However, many quarry-based product costs are set to rise across the UK as the supply chain struggles without viable greener fuel alternatives.
The last year has seen increased financial pressures on UK construction firms as a result of skyrocketing material and labour costs. To implement this policy now would inflict more damage to a sector already struggling with high overheads, market uncertainty and pandemic-related issues.
The policy might have been conceived as an initiative to encourage more environmentally friendly construction practices – a move which the FMB supports - however its implementation at this point in time could prove immensely problematic for the industry.
The construction industry needs greater support from government
The FMB is concerned that an exemption has been given to certain industries such as agriculture, parts of the leisure and marine Industries but not to construction.
In these challenging times more attention and targeted support to help businesses in construction switch to greener alternatives is urgently needed. Trading conditions for this last two years have been unprecedented and the stress placed on individuals working in the industry is mounting.
In some cases, greener alternatives to red diesel are not readily available to construction firms, or financially viable. The Treasury and Government must also realise that the policy’s implementation will result in higher costs for businesses, which will likely be passed on to the consumer.
Calling for a transitional agreement on red diesel rebate cessation
The FMB is calling on the Government to reverse its decision to end the rebate of biofuels, as electric and hydrogen-powered equipment alternatives are not yet readily available to UK construction businesses. Until such a time as they are, the Government should put a transitional arrangement in place to encourage businesses to use fuels that emit less carbon.
In most cases, the cessation of the red diesel rebate will leave SME businesses with only two viable options; start using regular diesel to power their equipment or turn to biodiesel. Biodiesel emits up to 90% less carbon than regular diesel but on average costs 10-15% more.
With rising costs putting many SME construction firms under increasing pressure, the majority will inevitably turn to regular diesel, which will not deliver this policy’s objective to cut carbon.
As we approach the policy’s implementation in April the FMB will continue to raise awareness of this issue and to provide updates and assistance to those affected by the proposed change.
Want to know more?
We'll be releasing more information on this matter in the build up to the April implementation date. In the meantime if you have any questions or concerns surrounding the changes, contact your local Hub Director or a member of our Policy team via [email protected].
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