Industry calls out impact of loss of red diesel rebate

Four of Northern Irelands leading Trade Bodies for the construction, mineral products and manufacturing sectors are warning that material, manufacturing and construction costs are set to increase from this April. From 1st April 2022, many sectors will lose their entitlement to use ‘red’ diesel and rebated biodiesel across a variety of applications, including manufacturing, construction and mineral products being the industries most affected.

The estimated cost of this in Northern Ireland is estimated at £20 to £25 million and according to the Civil Engineering Contractors Association (CECA), losing the red diesel rebate could cost the UK
construction industry between £280m to £490m a year.

Red diesel is just ordinary ‘white’ diesel with a dye in it, but it is taxed at a much lower rate than white diesel. One of the biggest changes for construction and minerals industry users is that heavy plant and equipment of all kinds will no longer be able to run on red diesel when used for construction and mining purposes. This includes all non-road mobile machinery (NRMM), including excavators, dumpers, shovels and cranes. The construction and mining industry will also lose permission to use red diesel for commercial heating and power generation, for example when using
mobile generators on construction sites.

Gordon Best, Regional Director MPANI, commented “Our industry takes its environmental responsibilities seriously, as can be seen by the areas of priority habitat created through quarry restoration over the last decade, and the 53 per cent reduction in carbon dioxide emitted by the concrete and cement industry since 1990. We already pay significant levels of environmental tax through aggregates levy and climate change levy. As an industry, we are totally committed to Net Zero and the energy transition to lower/zero carbon fuels such as compressed natural gas, electric batteries and hydrogen fuel cells. Our Industry has always been at the forefront of new technology but the new zero carbon solutions that will be used to power the heavy equipment we depend on is still some years away. We certainly do not believe the rebate should last forever. We believe that Government should have delayed the removal of the rebate or at least phased out its use over the next five years".

Mark Spence, Managing Director of the CEF, commented, “At a time of unprecedented cost pressures on our industry, and in the absence of an obvious and robust alternative to diesel, the removal of the rebate at this time will do nothing to progress the carbon reduction agenda to which we are all committed, but will significantly increase the risk of business failure in our sector. A reasonable extension of time would allow the more timely transition to alternative fuels and protect jobs and our economy, ultimately enabling the carbon reduction we all seek”. 

Gavin Maguire, FMB NI Director said; “Construction continues to be leading the way towards a greener industry. Many sole traders and SME companies are making daily changes to how they operate and build. However, at this time this policy will be damaging to a sector already struggling with high costs due to materials and labour issues. We have concerns that an exemption has been given to certain industries such as agriculture, parts of the leisure and marine Industries but not construction? In these challenging times there needs to be more time and urgent targeted support to help businesses in construction switch to greener alternatives which in some cases are not readily available. In the meantime, the Treasury must accept that this will be an extra cost for business, which will likely feed through to the consumer.”

Stephen Kelly, CEO Manufacturing NI, commented “The removal of the Red Diesel Rebate will have significant financial implications for most manufacturers who by necessity consume it for machinery, heating and other uses in the absence of any other or affordable alternative. As a sector we estimate that it will add tens of millions of pounds of new cost to firm who are already struggling to cope with huge inflation in energy, supply chain and employment costs. Whilst the Chancellor may welcome a big new pot of money, firms will need to find efficiencies which may include reducing how many they employ and or pass the costs on to the end consumer”.