Red diesel, silver lining?

16 July 2021

There’s more evidence that prices are going one way for the foreseeable future. 

The UK inflation rate reached 2.5% in the year to June, which is higher than the Bank of England’s 2% target for a second successive month and the highest level since August 2018. 

Against a background of surging demand as the economy rebounds and freight transport is disrupted, the Bank’s deputy governor has suggested inflation could reach 4% later this year.

This might lead to pressure on interest rates, although many analysts think the inflationary increase will be temporary. But the fact is that prices are rising. 

How will businesses cover their costs? 

Over in the US, the famous PepsiCo soft drinks maker has clearly stated that it will be passing on the costs to customers. Prices of raw materials, packaging and deliveries have increased and demand is rising as the economy recovers. 

Many stories on the blog this year have reported a similar picture for hirers: equipment prices are increasing because of global supply issues and customer demand is booming. Yet hirers are traditionally reluctant to raise prices. 

Something else that’s rising next April is the cost of fuel for construction equipment with the abolition of the red diesel tax rebate. And that will be a substantial increase of, typically, 47p a litre. 

So here’s a thought. 

If customers know that the cost of running their hired equipment is going to rise significantly, could this smooth the introduction of eco-friendly equipment? Machines with Stage V engines or battery packs typically carry a higher price tag reflecting the cost of development. 

It’s cold comfort for the consumer perhaps, but if their costs are increasing in any case, it might persuade them to take the green option – especially as manufacturers are quick to point out that the running costs can work out lower. 

Maybe the red diesel situation has a silver lining. 

Photo: Gustavo Fring/Pexels