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How the fuel duty freeze helps dealers

When George Osborne delivered his Autumn Statement last week, a collective sigh of relief spread across the country as 33 million motorists learned that they will be spared the three-pence rise in fuel duty indefinitely.

The proposed increase, which was due to come into effect in January, would have cost the average motorist a further £90 a year and bolstered the Treasury’s revenue by about £1 billion.  While postponing it isn’t particularly good news for the public purse, which saw a £400m drop in fuel duty-generated revenue in 2011/12, it does ease the growing financial strain on many motorists throughout the country.

Despite much speculation in the media about a planned duty freeze, many drivers were already braced for the hike, meaning that, while this news hasn’t left anyone feeling flush, some will now be more willing to spend money on general maintenance.  Scheduled servicing, which can improve economy by up to 10 per cent by replacing the air filter oil, should feature much higher on the motorist’s agenda – provided dealers get the message out.

However, with growing pressure to reduce the budget deficit in 2013 and armed with the fact that duty is already 10 pence lower than it would have been under legislation put in place by the previous government, the Chancellor is highly likely to introduce a duty rise at some point in the near future.

Given that fuel prices already cost the average motorist over £1,500 a year, growing awareness of the threat of higher duty is likely to incentivise many more motorists to look at new ways to reduce fuel consumption.

Fuel prices have already driven many motorists to invest in more frugal, less polluting – and often smaller – cars in a bid to save money in the long-term.  Downsizing has helped the UK to become the second-largest new car market in Europe, registering nearly two million cars since the start of the year.  Not only does that exceed the government’s expectations for the year so far, it also betters anything that the industry has witnessed since the 2008 scrappage scheme.

According to the SMMT, the trend for motorists to reduce their fuel bill will continue into 2013, with city-car, supermini and alternative-fuel segments set to grow strongly.  This should help the number of new car registrations increase once more, with the target of 2.015 million cars likely to be revised in light of this year’s unprecedented growth.

As many motorists look to 2013, they will surely remember Benjamin Franklin when he said, “The only things certain in life are death and taxes.”  So, while the country relaxes a little at the news of frozen fuel duty, it will surely be the anticipation of what is yet to come that will increasingly drive demand in the motor industry.

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