From next April, contractors will no longer be able to take advantage of the rebate on red diesel for off-road plant.
With limited alternatives available, firms warn the shift to normal ‘white’ diesel will simply place an additional burden on already struggling construction firms.
For industry SMEs this will amount to an added cost burden of between £250,000 and £600,000 per year, according to a survey by the Civil Engineering Contractors Association trade body.
Nearly half of the businesses surveyed also said they were worried about their ability to continue trading in the face of the cost hike.
Lower carbon alternative fuels are available, including some hydrogenated vegetable oil (HVO), but from April 2022 these alternatives will also be taxed at full rate, providing little incentive to switch to a lower carbon alternative.
CECA Director of External Affairs, Marie-Claude Hemming said: “While the Government has legislated to remove the tax rebate on construction’s red diesel use, it has also removed any incentive for greener fuels.
“This policy increases tax revenues but no longer provides the option to choose lower carbon alternatives in the first instance.
“CECA believes that in order to meet environmental goals, genuinely lower carbon fuels should be exempt from the same tax levels as standard fuels.
“Our members recognise their responsibility to protect the environment for future generations. We are keen to work with Government and fuel suppliers to ensure that genuinely lower carbon fuels are used across the whole of the construction industry, helping us build and maintain the modern and reliable infrastructure we need.”