Expected tax rises threaten the UK economy’s largest sector. Logistics UK has urged the Treasury to avoid further tax increases ahead of the Autumn Budget. The appeal highlights the critical role of rail freight and wider logistics in keeping the UK economy moving.
The UK logistics sector has made a formal submission to the UK Treasury ahead of the Autumn Budget, warning that further tax rises could stifle growth and drive inflation across the economy. Central to the argument is the role of rail freight, which moves millions of tonnes of goods across the country, ensuring supply chains remain resilient, efficient, and sustainable.
Affected by any increase in operating costs
Logistics UK, the sole trade body representing all aspects of the sector, emphasises that logistics underpins every product from food and medicine to construction materials and consumer goods. Any increase in costs, whether through fuel duty, employer National Insurance Contributions (NICs), or business rates, would ripple through supply chains. They say that would affect prices for households and businesses alike. Rail freight, as a lower-carbon, high-capacity mode of transport, is particularly efficient but not immune to wider sector pressures.
The logistics sector cannot shoulder the burden of further tax increases without fuelling inflation and constraining economic growth, Logistics UK told the Treasury. The submission outlines how logistics costs are embedded in all products. Chancellor Rachel Reeves is expected to hit the economy hard with fresh fundraising measures on 26 November. However, Logistics UK say higher taxes translate into higher prices for households and businesses. Intermodal and rail freight operations, which already offer cost-effective and sustainable solutions for long-distance and bulk movements, risk being affected by any increase in operating costs across the logistics network.
Workforce and Operational Pressures
The logistics sector employs 2.7 million people, roughly eight per cent of the UK workforce. Logistics UK’s analysis shows the recent rise in employer NICs will cost the sector an estimated £1.7 billion (€2bn) this year. Fuel duty is another major pressure, with a fifth of all fuel duty collected by HMRC paid by logistics businesses.
Kevin Green, Acting Chief Executive of Logistics UK, commented: “The Chancellor has said she is planning ‘targeted action’ to bring down inflation, but increasing fuel duty could do the exact opposite. Fuel accounts for around a third of the cost of operating a 44-tonne HGV. While rail freight is less affected by fuel costs than road haulage, higher sector-wide costs threaten the overall efficiency and competitiveness of the supply chain.”
Protecting Investment in Logistics Infrastructure
Logistics UK is urging the Treasury to ensure business rates reforms (taxes based on commercial property) protect investment in logistics infrastructure. and do not create additional inflationary pressures. “Business rates are a significant fixed cost for logistics,” said Kevin Green. Warehouses, distribution centres and rail-connected hubs across the country could face rising bills, particularly larger premises of the sort disproportionately dependent on rail.
“The Autumn Budget needs to recognise how logistics underpins our economy and is fundamental to our way of life,” Green added. The UK Government’s “Modern Industrial Strategy” (which has been criticised for scant mention of rail) says that logistics makes a vital contribution to the UK economy. Rail freight nevertheless plays a central role. “It supplies hospitals, schools, factories, construction sites, shops and homes with everything they need, everywhere, every day,” says Green. “Nothing moves without logistics.” Whether that message gets through or not will be revealed in just over a month’s time.