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Ukraine invasion prompts call to delay red diesel ban

A group of construction firms has called on the government to delay next month’s removal of the red diesel rebate.

Several large contractors, including Laing O’Rourke and Sir Robert McAlpine, have already announced that they will stop buying diesel and will switch to running machines on vegetable oil (HVO) as they attempt to keep in line with their net-zero pledges.

But the National Federation of Builders (NFB) has warned that although it “supports decarbonisation”, the war in Ukraine on top of the energy crisis and the effects of covid-19 had made all energy “increasingly unaffordable”.

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It made a last-ditch call for the planned removal of the red diesel rebate on 1 April to be delayed because “even the tiniest shifts in prices can put businesses in jeopardy”.

Richard Beresford, chief executive of the National Federation of Builders (NFB), said: “The government has limited control over the annual price increases of gas and electricity, which in the last year have gone up by 29% and 19% respectively, but in the red diesel rebate, it has the power of deferral, so that industry pays a 47% increase on pre-pandemic fuel costs, rather than 191%.

“The perfect storm isn’t just the price of UK energy. Due to covid-19, the worldwide shortage of semi-conductors that electrified plant machinery requires won’t start improving until 2023 and biodiesel production is still below pre-pandemic levels which, with a 16.5% lower wholesale price than at the pump diesel, was expected to help absorb price rises.”

Beresford argued that the invasion of Ukraine by Russia had “changed the landscape again”, as countries who import oil and gas from Russia start purchasing elsewhere, driving prices higher.

Beresford suggested the red diesel rebate could instead be removed gradually over a five-year period “allowing companies to adjust, plan and adapt over the medium term”.

So far, the government has resisted calls to delay the removal of the rebate and it is still scheduled to be removed from 1 April.