A possible UK government move to cut the rebate on red diesel in next weeks Budget 2020/21, could cost the construction industry at least £280 million a year.

Raising the issue, CECA Scotland has said that it would be a devastating blow to many Scottish based civils contractors, already struggling thanks to falling workloads over the past two years.

Currently, there is a 47p reduction in the cost of red diesel, reflecting the fact that plant, including excavators and generators, do not use the road network. This rebate is set to be axed if the UK Government plan goes ahead.

CECA has written to the Chancellor of the Exchequer to outline how his proposed plans to remove the rebate will negatively impact the construction supply chain, risking placing further pressures at a time when margins are already extremely tight for many. There is a real danger that axing the red diesel rebate could hit many SMEs extremely hard, at a time when the sector is already struggling.

-- Advertisement --

More than half of red diesel is used in the construction sector. Ironically, by withdrawing the rebate, the UK Government will increase costs for the taxpayer, given the high level of public sector contracts civils contractors are engaged on. The change would have an immediate detrimental impact on Scotland's civils contractors, many who are working on fixed price contracts.

CECA is calling on the UK Government to keep the exemption and instead work with the construction sector to phase in any future cuts in the rebate, to allow for the roll out of lower carbon plant across construction sites and to give civils contractors time to adapt and allow industry to engage in a sustainable transition to greener fuels in the years ahead.

Commenting on the Government proposal, CECA Scotland Chief Executive Grahame Barn said: "I have been in touch with CECA Scotland members right across Scotland who are extremely concerned about this damaging proposal from the UK Government and the impact it will have on the Scottish civils sector. Members are telling me they will have to review tenders and that it will have a severe cost impact. Many are engaged on fixed price contracts; there is no way of recovering the significant extra costs from clients. There is a real danger that if the axe falls, there will be Scottish contractors, particularly SMEs, who will be forced out of business."

Grahame added: "This is a short-sighted proposal from the Chancellor and CECA Scotland urges him to think again. At the very least, we hope he will listen to industry concerns and at the look to phased approach to the rebate reduction, otherwise he risks undermining the very sector which is central to his Government's infrastructure ambitions."

(MH/JG)