21/03/2011

By Ian Baxter, Managing Director of RH Freight

With the Budget set to be announced on Wednesday, everyone is wondering whether George Osborne will implement the former Government’s proposed fuel tax increase of 1p per litre, or whether he will be actioning a http://www.freshbusinessthinking.com/news.php?NID=7059" target="_blank" rel="nofollow">fuel duty stabiliser, working to counteract increases in oil prices by lowering duty accordingly.

Amongst those most nervous about the pending review are Britain’s small businesses. Whilst David Cameron has promised that his is a government of enterprise, if increased fuel taxation does come in, it is my opinion the real victim will be British industry.

With the majority of Britain’s businesses relying on transportation in some way — whether this is to import or export goods, or to provide some form of service, companies will suffer doubly as the cost of raw materials is also set to increase.

As it is simply not feasible for a business to raise their prices to accommodate these growing duties every time they occur, to an extent, establishments up and down the country will be forced to absorb the increases. Sadly, not everyone will be in a position to do this, and certainly it is likely that some smaller companies, for example in the transport industry, will fail to survive.

However, no matter how strong the business, such duties cannot be underwritten indefinitely, and at some point consumer prices will have to increase to reflect this. Customers too will be hit twice, having to front both the increased cost of their personal fuel consumption alongside their now more expensive grocery bill - even the largest of supermarkets will still be affected by the transportation costs of shipping their goods.

This ties back to my original point — the real victim of these proposed taxes will be UK PLC as a whole. Britain will become a less competitive arena in which to do business; services and products will cost more than those provided by our international competitors not plagued by higher levies. Corporations will tilt their emphasis towards contracts in foreign markets, which in turn would have a negative effect on our economy. At the risk of sounding like a harbinger of doom, it is entirely possible that this could definitively push us into a double dip recession. My advice therefore is that “enough is enough”. As an absolute minimum fuel duties must not be increased any further.