Delay fuel duty hike or risk stalling major transport projects, Labour warned
The government risks stalling key road and rail infrastructure projects unless it extends the freeze to fuel duty, a leading construction industry body has warned.
The Construction Plant-hire Association (CPA), which represents more than 2,000 firms providing construction machinery and expertise, told CityAM “nothing will get built” if its members pull back from projects due to excessive fuel costs.
Rachel Reeves extended a Tory-imposed freeze on fuel duty to this September at the last budget, but the government has faced growing pressure from industry to delay hikes to the tax for longer.
More than 65 per cent of the CPA’s members are directly involved in critical infrastructure and transport projects like HS2 and nuclear and renewable sites, the trade body said.
These construction firms represent over £1.5bn in annual turnover but said they may be forced to pull out of projects if fuel costs become too much to bear.
Of the CPA’s members, 66 per cent say energy costs are their top concern, and 42 per cent report dwindling confidence in their ability to deliver on these crucial projects.
Fuel duty hike ‘threatens key projects’
The effective blockage to the Strait of Hormuz during the Iran war has sent oil prices soaring above $100 per barrel, putting further pressure on the fuel-intensive construction industry.
The freeze on fuel duty was first introduced by the Conservatives in March 2022, and was extended by Reeves in November until the end of August this year.
But the 5p per litre hike in the tax on fuel is set to come into force in September on a staggered basis, with fuel duty returning to the full rate by March next year.
Steven Mulholland, chief executive of the CPA, told CityAM this rise in costs will “feed straight into” the delivery of key infrastructure projects.
He said: “Fuel isn’t a marginal cost for this sector – it’s what keeps sites moving. Every road, rail and critical infrastructure project depends on machinery running every day, and they run on diesel.
“You can’t deliver vital projects if the machinery needed to build them is becoming more expensive to run. If construction and rail plant-hire firms pull back, nothing gets built, enhanced or maintained.”
Starmer advisor calls for further freeze
Earlier this month, the government’s cost of living tsar called on Labour to extend the cut to fuel duty to reflect the rise in petrol prices caused by the Iran war.
Richard Walker, who is also executive chair of supermarket chain Iceland, said: “That’s going to expire in September. I think, given where we are, we do need to be thinking and talking about extending it or enlarging it.”
Sir Keir Starmer has said the scheduled tax hike is “under review in light of what’s happening in Iran” but has not confirmed an extension to the freeze.
Mulholland said: “Labour says it wants to accelerate infrastructure delivery. That has to be backed by policy. Increasing fuel duty at this point will do precisely the opposite.
“If ministers are serious about delivery, they need to support it in practice, not just in rhetoric.”
The Treasury did not respond to a request for comment.