UK fuel duty hike threatens £1.5bn in critical infrastructure projects

A planned 5p per litre rise in fuel duty could threaten major road and rail projects across the UK. Industry leaders warn that soaring fuel costs may force construction firms to abandon critical infrastructure work. Over two-thirds of these companies already list energy expenses as their biggest concern. The freeze on fuel duty was first introduced by the Conservatives in March 2022. Chancellor Rachel Reeves later extended it until the end of August this year. But a 5p increase is now scheduled for September, with the full hike expected by March 2025.

The Construction Plant-hire Association (CPA) represents firms with a combined annual turnover of more than £1.5bn. Over 65% of its members work on essential transport and infrastructure projects. A recent survey found that 66% now rank energy costs as their primary worry, while 42% admit confidence in delivering projects is falling.

Steven Mulholland, chief executive of the CPA, warned that higher fuel duty would directly impact project budgets. He stressed that increased costs would 'feed straight into' the delivery of vital works. Meanwhile, Richard Walker, the government’s cost of living tsar, urged Labour to extend the freeze, citing rising petrol prices linked to tensions in Iran.

Sir Keir Starmer has since acknowledged the issue, stating the tax hike is 'under review in light of what’s happening in Iran'. However, no decision on an extension has been made. The Treasury has not responded to requests for comment. Without further intervention, construction firms may withdraw from key projects due to unsustainable fuel expenses. The planned duty increase could disrupt over £1.5bn worth of annual infrastructure work. Industry leaders continue to push for a policy reversal before September.