Small firms struggling to cope with the rising cost of fuel

8 September 2005

Small businesses are struggling to cope with rising fuel prices, which increased by 10 per cent in the year to July 2005 and resulted in an 8 per cent increase in transport costs.

Britain’s biggest business organisation warned today that many businesses now face a stark choice. Either they have to absorb the fuel cost increases themselves – in some cases endangering the future viability of their business, or they must pass them on to their customers - putting future contracts under threat.

Strong growth in global demand for fuel has driven the initial cost of crude oil from $35 a barrel in July 2004 to well over $60 a barrel today. 47.1p a litre tax is levied by the UK government in addition to VAT.

Steve Collie, FSB Transport Chairman said:

"We accept that with increasing global demand and unreliable supply, particularly following Hurricane Katrina, prices are bound to increase. But ministers must not lose sight of the fact that at cost price UK fuel is the cheapest in Europe. It is only after fuel duty and VAT are added that it becomes the second most expensive.

"For some small road haulage businesses, fuel costs have mushroomed from around a quarter of their total costs to more than half. This can cripple small businesses who cannot absorb these costs in the same way as larger firms.

"Rising fuel prices do not just affect the road haulage industry. Many businesses face increased distribution costs and manufacturers are forced to pass on the increased costs of raw materials to their customers.”

Amongst the wide range of FSB members affected are:

The road haulage business:

Nigel Dunford runs a small road haulage business in Lincoln. He operates two trucks and is now paying £1,500 a month more for fuel than he did at this time last year. When he first started in business fuel was 25 per cent of total costs but it has now risen to 52 per cent, eating into profits.

He said:

“Big businesses can remain fairly competitive but small businesses are crippled, as they cannot absorb costs in the same way.

“We are being taxed out of business.”

The manufacturer facing increased distribution costs:

Mark Jeffries runs Camel Construction Products Limited in Wakefield, West Yorkshire. His business manufactures concrete curb-stones and spends £3,300 a month on haulage. He is now paying 8 per cent more on transport than last year because the company he uses has raised prices as a result of increased fuel costs.

The manufacturer facing increased raw material costs:

Jim Gifford runs a sign manufacturing business in Aberdeen, which is reliant on oil-based materials. His raw material costs have increased twice this year by 5 to 10 per cent each time. He cannot absorb these extra costs and has had no choice but to pass them onto his customers.

---

Press releases, papers and documents published on this page are the intellectual property of an organisation unrelated to Central Lobby. We promote their parliamentary and political campaigning activities as they are subscribers to the Central Lobby service.

As such, Central Lobby does not edit, endorse, or attempt to balance the opinions expressed on this page. The content of press releases and other such types of content are the responsibility of the originating organisation.