May saw fuel prices rise by more than at any other point since the turn of the millennium, with RAC figures recording a 6p per litre increase over the course of the month. This in turn ensured that inflation held firm at 2.4% in May, according to the Office for National Statistics.
While this is difficult enough for individual motorists, the increase in fleet fuel costs means that businesses are likely to be particularly hard hit by elevated fuel prices. With this in mind, it is worth asking whether the government is doing enough to help fleets cope with the impact of rising fuel prices, and whether they are receiving adequate help in their efforts to transition away from petrol and diesel towards electric and hybrid vehicles.
Managing fleet fuel costs
It is fair to say that fleets have taken plenty of proactive measures to manage their own expenditure on fuel. In particular, the widespread introduction of telematics technology has enabled fleets to boost both efficiency and productivity by simplifying maintenance, providing detailed insights into driver behaviour and enhanced route planning. This is likely to have had a significant effect on restraining fleet fuel costs.
Direct government interventions to help fleets manage fluctuations in fuel costs have however been relatively few and far between. Fuel duty was frozen for the eighth successive year in 2017, but the recent rebound in oil prices (with fuel prices subsequently rising disproportionately) has meant that fleets have felt little benefit. It has also been claimed that the fuel duty freeze, by encouraging more traffic on to Britain’s roads, has harmed air quality. This makes it all the more essential for the government to provide sufficient support to firms as they attempt to make the switch to more eco-friendly vehicles, which could provide a longer-term solution to the problem of rising fuel costs.
Fleets: are they going green?
For all the hype about electric vehicles, research suggests that Britain is – far from leading the way – lagging behind other countries in this area. According to a study carried out by Green Alliance, last year saw Germany overtake the UK in electric vehicle sales for the first time. To boost take-up of electric vehicles, the report emphasised the importance of encouraging fleets to invest in them, with public fleets in particular providing “an immediate chance to raise domestic demand”.
With this in mind, it’s worth looking at some of the incentives already introduced elsewhere in Europe to entice businesses and households to buy electric vehicles. In the Czech Republic, for instance, electric, hybrid and other alternative-fuelled vehicles are already exempt from the country’s road tax, while electric vehicles are also exempt from ownership and/or registration taxes in a number of other countries including Finland, Denmark, Poland and Romania. In Sweden, the purchase of low-emission vehicles is incentivised by a ‘climate bonus’ while company car tax is cut by 40% for electric and hybrid vehicles.
Britain does have a range of its own incentives to encourage electric and hybrid vehicle take-up among businesses, of course. These include:
• Plug-in car grants, offering up to £4,500 off the price of new pure electric cars, £2,500 off plug-in hybrids costing £60,000 or less, and up to £8,000 off the cost of some electric vans.
• Capital allowances, entitling businesses buying plug-in cars emitting less than 75g/km and zero-emission vans to write down 100% of the value during the first year of ownership.
• The Workplace Charging Scheme, which supports the up-front costs of setting up vehicle charging points at eligible workplaces.
In addition, plug-in cars are exempt from London’s congestion charge and T-Charge, while some towns and cities offer free parking for electric vehicles. However, as we’ve seen from examples elsewhere in Europe, much more can be provided in the way of incentives, as well as public investment in recharging infrastructure, to encourage fleets to make the switch to electric and hybrid vehicles. In the long run, only this can provide adequate protection from the financial burden rising fuel prices.