Civils contractors were braced for bad news in the budget with cutting the rebate estimated to cost construction up to £490m a year.
But Chancellor Rishi Sunak said plans to scrap the rebate would not take effect until April 2022.
And construction companies will also have a chance in the summer to press their case for being exempt from the abolition.
The government has listened to lobbying from the agricultural sector and exempted it from the changes alongside the rail, domestic heating and fish farming sectors.
Tax exempt red diesel, which is used by contractors for off-road plant, is presently 47p cheaper than regular diesel per litre.
Red diesel sales account for about 15% of total diesel sales and costs the Treasury £2.4bn/year in revenue.
Civil Engineering Contractors Association Director of External Affairs for the Marie-Claude Hemming said: “While we are glad that the Chancellor has listened to industry evidence that immediate implementation would have a catastrophic impact for many businesses across the construction sector, particularly our SMEs, the planned implementation period of two years will not be enough for many businesses, such as those who are on long-term frameworks with fixed pricing.
“For many of our members, there are no readily available low-carbon fuels or construction plant that use alternative sources of energy, and the impact of increased fuel costs will ultimately be passed on to customers.
“This change will also lead to a significant escalation in fuel theft, as there will be no way of distinguishing between gas oil and diesel used by road vehicles, and it is likely criminals will seek out construction plant as an easy target.
“It is to be hoped that where the Government is a buyer on long term frameworks, it will look at how it can support its suppliers when we transition to the new rules.
“We look forward to engaging with Government on this issue, to help them further understand the implication of this change for the construction sector in all parts of the UK.”