From 1st April 2022, the construction industry among others will be unable to use red diesel. Red diesel is very similar to white diesel; however, it contains a red dye and chemical markers to prevent its misuse in road vehicles and is taxed at a much lower rate.
The rebate has been prompted by the Government’s Net Zero strategy which aims to decarbonise all sectors of the UK economy. The strategy provided a two-year window to develop biofuel production and move to electrified plant machinery. However, the global pandemic has delayed much of this development.
In addition to a lack of development, unprecedented rises in fuel prices due to global events such as the war in Ukraine mean that not only do businesses face high costs but also have little to no alternatives. For businesses using red diesel, costs could double overnight without any intervention.
Whilst positive in the long term, Right Fuel Card believes that this change in the red diesel rebate eligibility comes at completely the wrong time and a delay is required to support businesses in moving to alternatives. As such we have joined a number of trade bodies in asking the Chancellor, The Rt Hon Rishi Sunak MP to defer the red diesel entitlement removal for twelve months.
David James, Sales Director at Right Fuel Card says, “1st April 2022 will mark the beginning of the new rules on who and what can use red diesel in the UK. We appreciate that for many of our customers, especially those within the construction industry that this will have a huge economic impact, especially at a time when fuel prices are at all-time record highs. The current duty on Red Diesel is 11.14ppl so from April 1st those who no longer have the entitlement will be spending an additional 46.81p per litre of diesel, a near 30% increase overnight.”
Richard Beresford, Chief Executive of the National Federation of Builders (NFB), said: “The development of electric plant machinery and alternative fuels was hit by Covid-19 lockdowns, so it was already tough to move from red diesel but a 190 percent increase on pre-pandemic fuel prices makes it unbearable for many businesses.
“Unlike the production of energy, the Government has direct control over duties and can act immediately to save British businesses from this tax it is imposing on those who worked during lockdown and broadly did not use furlough. If it decides not to act, consumers must be ready for construction costs and house prices to rise, food to get more expensive, businesses to pass higher heating costs on to consumers and millions of jobs to be in the balance.”
Brian Berry, Chief Executive of the Federation of Master Builders (FMB), said: “Unprecedented global events, not least the consequences of the Russian invasion of Ukraine, make this the worse time to pile yet more financial pressure on small builders with the ending of the red diesel rebate. The FMB fully supports the shift to greener alternatives to diesel for use by the construction sector, but progress towards these has been too slow and ending the rebate now risks the viability of local, community-based builders already hit by 18 months of spiralling product prices.”
Alasdair Reisner, Chief Executive of the Civil Engineering Contractors Association (CECA), said: “As an industry it is essential that we play our part in removing carbon from our sector, and we support the Government policies that have been put in place to achieve this. However, the situation in Ukraine is a game-changer in terms of immediate impacts on our sector.
“We are now seeing a significant risk to planned projects as rising fuel prices make them unaffordable. We believe that a delay in the implementation of the red diesel rebate removal would give vital breathing space for industry while still maintaining momentum on efforts to eliminate diesel from sites in the longer term.”
The following industry leaders and their respective organisations have signed the letter, which was submitted to the Chancellor, requesting the twelve-month deferral to the removal of the red diesel entitlement for construction:
Richard Beresford, Chief Executive of the National Federation of Builders (NFB)
Brian Berry, Chief Executive of the Federation of Master Builders (FMB)
Howard Button, Chief Executive Officer of the National Federation of Demolition Contractors (NFDC)
Jane Buxey, Chief Executive of the Stone Federation of Great Britain
Peter Douglas, CEO and Managing Director of the International Powered Access Federation (IPAF)
Vaughan Hart, Managing Director of the Scottish Building Federation (SBF)
David James, Director of the Right Fuelcard Company
Neil Jefferson, Managing Director of the Home Builders Federation (HBF)
Callum Mackintosh, President of the Scottish Plant Owners Association (SPOA)
Kevin Minton, Chief Executive of the Construction Plant-hire Association (CPA)
John Newcomb, Chief Executive of the Builders Merchants Federation (BMF)
Suzannah Nichol MBE, Chief Executive of Build UK
Ken Parkin, Chair of Construction Alliance Northeast (CAN)
Alasdair Reisner, Chief Executive of the Civil Engineering Contractors Association (CECA)
Mark Spence, Managing Director of the Construction Employers Federation (CEF)
