Increased fuel tax: the impact on British businesses

With the Budget set to be announced later this month, everyone is wondering whether George Osborne will implement the former government’s proposed fuel tax increase of 1p per litre, or whether he will be introducing a fuel-duty stabiliser (working to counteract increases in oil prices by lowering duty).

Britain’s small businesses are waiting with bated breath. David Cameron has promised that his government is “pro-enterprise” – but, if increased fuel taxation does come in, the real victim will be British industry.

With the majority of Britain’s businesses relying on transportation in some way – whether this is to import or export goods, or to provide some form of service – companies will suffer doubly, as the cost of raw materials is also set to increase.

It is just not feasible for a business to raise its prices to accommodate these growing duties every time they occur. Instead, establishments up and down the country will be forced to absorb the increases. Sadly, not everyone will be in a position to do this – many smaller companies, particularly in the transport industry, will fail to survive.

No matter how strong the business, such duties cannot be underwritten indefinitely. At some point, consumer prices will have to increase to reflect this. Customers, too, will be hit twice, having to front both the increased cost of their personal fuel consumption alongside their now more expensive grocery bill. Even the largest of supermarkets will still be affected by the transportation costs of shipping their goods.

The overall effect? Britain will become a less competitive arena in which to do business; services and products will cost more than those provided by our international competitors not plagued by higher levies. Corporations will tilt their emphasis towards contracts in foreign markets which, in turn, would have a negative effect on our economy. At the risk of sounding like a harbinger of doom, it is entirely possible that this could definitively push us into a double-dip recession.  

Enough is enough. As an absolute minimum fuel duties must not be increased any further.

Ian Baxter is the managing director of RH Freight, one of Britain’s largest freight companies.

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