The UK has been experiencing one of the worst fuel crises in living memory, eclipsing the panic buying sprees of 2005 and 2007. After many media outlets reported of a possible fuel shortage on Thursday 23rd September 2021 and Friday 24th September 2021, the whole of the UK saw lengthy queues at petrol stations. Many have attributed the crisis to Brexit and the shortage of HGV lorry drivers caused by the end of freedom of movement, however the government claimed that there wouldn’t have been a shortage of fuel if the public hadn’t panic bought and stockpiled.
Figures from the RAC showed the average price of petrol rising from 135.9p on Friday to 136.6p on Sunday, the highest it’s been since 2013. HSBC UK reported that fuel payments increased by 50% from the same day a week earlier, the largest spike in recent memory. Simon Williams, the RAC’s fuel spokesperson, stated, “When it comes to pump prices, it is a pretty bleak picture for drivers. With the cost of oil rising, wholesale prices are being forced up, which means retailers are paying more than they were just a few days ago for the same amount of fuel.”
We break down what the fuel crisis means for businesses across the UK, and what are the potential knock-on effects to the workplace and the wider economy.
Why The Fuel Crisis Happened?
It is estimated that there is a shortage of over 100,000 lorry drivers in the UK, causing huge logistical problems in the supply chain for not just fuel but also food and essential items. Many HGV drivers were from European countries and have since returned home or moved elsewhere as freedom of movement ended in Britain, as well as the COVID-19 pandemic hitting. Since the panic buying began on Friday, it is reported that between 50-85% of petrol stations outside of the motorway network have run out of fuel.
With many HGV drivers retiring also, a huge backlog of HGV driving tests have yet to be completed due to the pandemic. On average it takes 6-8 weeks to go through the necessary HGV driver training, testing and acquiring a licence before qualified drivers can hit the road. As a result, the government announced it will offer temporary visas to 5,000 foreign fuel tanker and food lorry drivers, as well as 5,500 poultry workers in a bid to ease the strain of disruption around Christmas.
The government have also announced the army have been called on standby to help petrol stations out with demand and deliver fuel. HGV licences have also been extended, as well as over a million letters sent to drivers who hold a HGV licence encouraging them to return to the industry as an emergency procedure. Competition law between oil firms has also been temporarily suspended by the government, allowing fuel suppliers to share information and work together to reduce further disruption.
How Fuel Affects Your Business?
Fuel affects businesses in many ways. If you use your own vehicle or vehicles for work, you may be able to claim tax relief on the approved mileage rate. This covers the cost of owning and running your vehicle (it does not include travelling to and from your work unless it’s a temporary place of work). To work out how much you can claim for each tax year you’ll need to:
- keep records of the dates and mileage or your work journeys
- add up the mileage for each vehicle type you’ve used for work
- take away any amount your employer pays you towards your costs, (sometimes called a ‘mileage allowance’)
The approved mileage rates to claim back are as follows:
First 10,000 business miles in the tax year –
- Cars and vans – 45p
- Motorcycles – 24p
- Bicycles – 20p
Each business mile over 10,000 in the tax year –
- Cars and vans – 25p
- Motorcycles – 24p
- Bicycles – 20p
You can also claim tax relief on money spent on fuel and electricity for business trips in a company car. Keep records to show the actual cost of the fuel. If the employer reimburses some of the money, it is then possible to claim relief on the difference. The advisory fuel rates for company cars can be found here.
What Are The Potential Consequences Of The Fuel Crisis?
The obvious repercussion from the fuel crisis is that many workers will be unable to travel to and from work due to not having the fuel reserves. Many fuel providers, including BP, Shell and Esso, Petroleum/ExxonMobil, Wincanton and Hoyer Petrolog UK, all predict that the fuel crisis will end in a matter of days.
A joint statement from the oil companies stated, “There is plenty of fuel at UK refineries and terminals, and as an industry we are working closely with the government to help ensure fuel is available to be delivered to stations across the country. As many cars are now holding more fuel than usual, we expect that demand will return to its normal levels in the coming days, easing pressures on fuel station forecourts. We would encourage everyone to buy fuel as they usually would. We remain enormously grateful to all forecourt staff and HGV drivers for working tirelessly to maintain supplies during this time.”
Before the fuel crisis, the government hinted at the prospect that a return to work from home requirements could be enforced as the winter months hit and the strain on the NHS is likely to increase again with COVID-19. The fuel shortage could boost the possibility of this, enabling many workers to work remotely if their jobs allow them to do so. To avoid the fuel crisis having even more drastic effects, digitalisation is crucial for businesses. We’ve seen during the pandemic the acceleration of digitalisation, especially through cloud technology where everything can be accessed under one platform, from both a consumer and an operative side. Implementing digital processes into the systems and approaches of your business enables any disruptions to be kept to a minimum.
In terms of the wider economy, the fuel crisis is likely to have significant ripple effects due to the rapid disruption on fuel supplies inevitably leaving many small businesses, health workers and drivers unable to do their jobs. On top of this, the recent news that energy prices will rise will undoubtedly see lower income families and businesses suffer. This is also predicted to trickle down to household grocery prices, potentially leading to a rise of 4% inflation topping warned the Bank of England, as the colder months beckon.
We hope this has outlined to you the scale of the fuel crisis and the effects it could have on your business. If you require any further information on cloud accounting, economic impacts from an advisory point of view, or anything accounting related for that matter, please don’t hesitate to get in contact with us at Nordens where one of our trusted advisors would be happy talking you through your query.