Delay ‘red diesel’ ban or businesses will collapse, Rishi Sunak warns

Rishi Sunak is urged to delay a ban on the use of ‘red diesel’ on construction sites and in factories when it will cost businesses hundreds of millions of pounds and trigger a wave of business collapses.

The Chancellor has pledged to end the use of low-tax fuel in construction and manufacturing from April this year as part of the government’s push to cut carbon emissions.

But construction industry groups and MPs warn it will lead to up to £500million in additional costs for businesses and jeopardize economic recovery.

Ministers insist the shake-up will spur the development of greener technologies such as the hydrogen fuel cells being developed by JCB – but the companies have stressed there is currently no realistic alternative to diesel more expensive white.

Alasdair Reisner, chief executive of the Civil Engineering Contractors Association, warned that larger companies would be able to absorb the extra costs, but many smaller businesses that have been battered during the pandemic will go to the wall as a result.

The association estimates the hit to businesses could be between £300m and £500m. A survey last summer found that a fifth of construction companies feared the added burden would make their business unviable.

Mr Reisner said: “There are serious concerns about this change – it is the number one issue we are hearing about at the moment.

“The changes to red diesel will cause very significant cost pressures for construction companies, at a time when they are already facing a series of other cost increases.

“Our members know they have to play their part in getting to net zero, but for the green revolution to be sustainable you also need a sustainable industry – you have to ask yourself if that will be the case if we have a big number of failures as a result of these changes.

“At this time, I think there is reason to delay the introduction of change, due to the economic circumstances we find ourselves in at the moment.”

He said that while some companies passed on the costs by charging customers more, others would not have realized the increased costs until too late and would find themselves having to take a financial hit on projects already agreed for this year. .