UK fleets benefit from fuel duty cut

Fleet budgets in Britain will benefit immediately from the UK Government’s decision to cut fuel duty for petrol and diesel by 5p per litre (€0.06/litre) from 6pm tonight (23 March).

The reduction is the biggest ever single cut on fuel duty rates, and aims to help drivers across the UK meet rising costs due to the spike in oil prices following the war in Ukraine.

The cut will last 12 months and should save the average car driver £100 (€120) per year and a typical van driver £200 (€240). It will cost the Government £2.4 billion (€2.9), although much of this will be recovered through a windfall in VAT levied on higher pump prices.

Record pump prices

Petrol prices have peaked at £1.67 per litre and diesel at £1.79 per litre in the last month, compared to £1.21 and £1.24 respectively a year ago. Duty and tax account for 51% of petrol pump prices and 49% of diesel pump prices in the UK

Fleet and motoring organisations welcomed the cut in fuel duty, but said it didn’t go far enough.

Martin Jenkins, CEO of Zenith Commercial and group strategy director, said: "This reduction will help fleet operators who have seen the cost of diesel rise by 40% over the last 12 months, with prices 30p per litre more expensive than the start of the year.
 
“However, rising fuel costs is just one of many factors that have hit commercial fleets hard recently. Operators will need support to navigate the short-term cost pressures as they take the significant leap into zero-emission transport models over the next decade. We hope this is just the start of further measures taken by the Government and that the critical role played by commercial fleets will be given due consideration as motoring taxation policy evolves to accompany that transition."

Will fuel retailers pass on savings?

Nicholas Lyes, RAC head of policy, questioned whether the full reduction of 5ppl would be passed on to fleets and motorists.

“In reality, reducing it [fuel duty] by 5p will only take prices back to where they were just over a week ago. There’s also a very real risk retailers could just absorb some or all of the duty cut themselves by not lowering their prices. It wouldn’t be totally unexpected based on the biggest retailers not reducing their prices late last year when the oil price fell sharply.”

Electrification is the answer

For fleets focused on total cost of ownership, rather than fuel bills, the solution to spiralling costs is electrification, said Spencer Halil, Chief Commercial Officer, Alphabet.

“Whilst the Chancellor’s fuel duty cut today is a welcome relief for both businesses and consumers, it highlights the importance for fleet managers to use this time to look at electrifying their fleets so they can benefit from lower fuel whole life costs," he said. "However, more support is needed from the Government to help companies navigate the move to lower emission vehicles for longer-term sustainability both financially and for carbon emission targets. The fleet industry is still lacking clarity on what will happen to benefit in kind taxes following 2024/25, which we hope to see the Chancellor address in his Autumn budget.” 

Find out how to cut your fleet fuel bills in 10 easy steps