Red or white…(Diesel that is)

Limitations on the use of red diesel for the construction and engineering sectors UK.

Glasgow and COP26 resulted in various commitments from global economies to work towards targets in the reduction of greenhouse gas emissions. The UK is to target the reduction of greenhouse emissions to net zero by 2050.

However, even prior to COP26 there were already legislative changes afoot to have cleaner air. The Finance Bill 2021, and the associated secondary legislation, as part of the government’s plans to reduce carbon emissions, has the effect of restricting the usage of red diesel after April 2022.[1]

What is red diesel? In short it is regular (white) diesel that is dyed to make it identifiable. Why? It is taxed at a much lower rate, making it almost 50 pence a litre cheaper than white diesel. That discount will end for those industry sectors that have used it, but are now restricted from its usage post April 2022.

Construction and manufacturing industries cannot use red diesel after April 2022. These are sectors that use the rebated red diesel. In the construction industry, site electricity generators along with heavy plant, machinery and heavy vehicles will all now be forced to run on white diesel to a much higher cost.

There is pressure on all industry sectors to adopt green measures. This is now increasingly becoming the norm, and is affecting virtually all businesses and sectors. By way of illustration, Lloyds Bank has announced that in relation to green homes, when looking at affordability  there will less stringent stress testing.[2]

The governments stated aim is to encourage businesses affected by the red diesel restrictions to use less fuel, or eventually to adopt greener alternatives. However, few in the construction industry would use more fuel than absolutely necessary, so in order to avoid cost inflation, there needs to be alternative options that the construction and engineering sectors must have.

So have we got the alternative technology to give viable options? For example, electric powered plant or cleaner fuels such as hydro treated vegetable oil. Is there scope for future use of Hydrogen power? As we have previously discussed in this blog, significant strides have been made in this area to date and there are a number of construction vehicle suppliers now providing a broad range of electrically-powered construction machinery. However, despite this, diesel power is still dominant in the sector and in some areas there are few, if any, alternatives available.

For the construction, engineering and energy sectors, the following points arise for consideration and debate:

    • Super inflation in the construction, engineering and energy sectors is a massive issue in the UK, and indeed in other parts of the world. Rising supply costs and increased energy prices have dogged the industry in 2021. This loss of rebate is likely to result in yet further increases to site and project costs. In turn this is likely to increase the pressure on the bottom lines of many companies in the sector, and is in turn likely to mean more expensive houses, hospitals, schools, road projects and so on. This is a pertinent issue in the UK in particular, given the shortage of affordable housing and the current issues surrounding the state of disrepair of some of the housing stock in inner cities.
    • Against this, the government is not forecasting significant macroeconomic benefits in terms of increased tax revenue – meaning that a government already short of cash thanks to the Covid-19 pandemic will likely have to pay more for its construction projects, with no substantive additional money coming in against which to offset that cost.
    • Concrete processing plants will be affected by steep cost rises. To state the obvious, concrete is a key ingredient on any construction project, and is the most widely used material in the world!
    • It is being reported that in Northern Ireland the cost to construction businesses could be as much as £25M per year.[3]
    • Plant and machinery that is no longer eligible to use red diesel must be drained, flushed and cleaned. Furthermore, any usage outside the permitted circumstances may result in confiscation of plant and machinery. In practice this may create a significant administrative burden on companies in the short term.
    • Whilst the industry accepts the need to embrace green practices to strive towards net zero carbon emissions by 2050, some argue that the changes being implemented are possibly too soon, and before alternative fuels and/or technologies are in place.
    • Have we actually got readily available alternative green options? At present, is the only viable option arguably to switch to white diesel only, and if so, does that really reduce the carbon emissions from the usage of red diesel? In reality the answer is no, unless a cleaner source of fuel is available. This in turn leads to a need for potential machinery modifications to accommodate such fuels. Additionally, problems may grow for plant hirers when machinery is hired consecutively by unaffected and then effected industries. Plant and machinery in the construction industry, often represent considerable assets of a business. If the idea is that these will become obsolete, this will present further problems for the sector.
    • The government’s thought process, on the other hand, appears to be that necessity is the mother of invention, and increasing fuel costs will drive down emissions created by the construction industry.
    • Those in the industry cannot be expected to absorb these costs, and the inevitable effect will be that these additional costs of running plant machinery, concrete manufacture and quarry operations, to name a few, will need to be passed onto the end users.
    • As with all cost increases there will inevitably be considerable impacts on current projects. For contractors bound into contracts that prohibit price changes or increases for these matters, this change alongside the current price hyperinflation dogging the industry could prove fatal.
    • Equally, increased fuel costs and price hyperinflation will increase the uncertainty around tendering for work. Prospective contractors will need to consider carefully the risks posed by these cost increases and how they are likely to be affected in the long term.

[1] Rail transport, agricultural, fishing and water freight, amateur sports clubs, golf courses, non-commercial power generation, traveling funfairs and circus.

[2] The Sunday Telegraph, 23 January 2022. This on basis that green homes are more efficient to run, and there will be lower outgoings.

[3] BBC News 24/01/2022-Red Diesel loss ‘could cost businesses millions’

“And That’s Another Fine Mess You’ve Gotten Me Into:” Disputes in the Construction, Engineering and Energy Sectors

By Vijay Bange

The timeless catch phrase is of course from the famous comedy duo Oliver Hardy and Stan Laurel. Looking beyond the blame game is important. Problems will inevitably arise with complex large infrastructure projects. Understanding the underlying reasons and what the root causes are will perhaps aid in the process of reducing conflict. Continue reading ““And That’s Another Fine Mess You’ve Gotten Me Into:” Disputes in the Construction, Engineering and Energy Sectors”

The Digital Age Still Needs Infrastructure

I am an unashamedly massive fan of the Back to the Future film franchise. Yes, even the sequels.

One of my favourite lines from the franchise is spoken at the end of the first film and the beginning of the second. Doc, Marty and Jennifer are about to travel to the distant future (2015, to be precise). When Marty points out there might not be enough road to get up to 88 mph, Doc flips down his brushed aluminium shades and intones: “Roads? Where we’re going we don’t need roads.” And the DeLorean flies off to the future thanks to an early 21st century hover conversion.

Brings a smile to my face every time

Continue reading “The Digital Age Still Needs Infrastructure”

Luck of the Law: Lessons to be Learned from Green v Petfre

They say that the house always wins, but as the recent case of Andrew Green -v- Petfre (Gibraltar) Limited t/a Betfred  illustrates, even the house can get caught out sometimes.

When lucky punter Andrew Green won over £1.7m following a 5 ½ hour stint on Betfred’s ‘Frankie Dettori’s Magic Seven Blackjack’ game in January 2018, he was dismayed to find out a few days later that the company was refusing to pay out, claiming that there was a glitch in the game, and that the house rules stated that, in those circumstances, Betfred were not required to pay. Mr Green sued, and the matter eventually ended up in Court. Following a hearing on 15 October 2020, Mrs Justice Foster DBE granted Mr Green summary judgment and awarded him his winnings.

Continue reading “Luck of the Law: Lessons to be Learned from Green v Petfre”

A step too far?

A step too far?

    • Third party consultants, and duty of care in tort.
    • No duty of care owed in tort by a third party design consultant to a contractor with no direct contractual nexus.

Large infrastructure projects are often subject to intricate contractual relationships between the relevant stakeholders, and this will also include collateral warranties to cover any potential gaps in liability to mitigate potential effects of one of the participants in the contractual matrix becoming insolvent. Parties lower down the contractual chain may engage their own designers or consultants to discharge their obligations up the contractual chain. An interesting scenario arose in the recent case Multiplex Construction Europe Ltd v Bathgate Realisations Civil Engineering Ltd (Formerly Dunne building & Civil Engineering Ltd (In administration) (2) BRM Construction LLC (3) Argo Global Syndicate 1200 (2021) , and the two issues that were heard by way of preliminary issue.

The facts:

    • The main contractor sub-contracted certain design works to the sub-contractor.
    • In turn the sub-contractor sub-contracted certain design work to the designer (Second Defendant).
    • There was a requirement pursuant to BS 5975 for certain independent design checks and approvals to be done by an independent third party. For that reason, and to discharge its contractual obligations to the main contractor, the sub-contractor engaged a firm of consulting engineers to do this, and issue the relevant certificates.
    • The contractor alleged that defects issues arose because of design issues.
    • The contractor issued proceedings against the sub-contractor and the designer.
    • Judgment in default was obtained against both.
    • The sub-contractor was in administration. The designer was uninsured. The consultant had gone into liquidation.
    • The contractor pursued the consultants insurers.
    • There were two preliminary issues that were dealt with by His Honour Judge Fraser, sitting in the TCC:

Continue reading “A step too far?”

UK Government Consultation on the Promotion of Cryptoassets

By Sam Pearse

30.08.2020

Samuel J. Pearse

The UK Government has launched a Consultation regarding cryptoassets, focussing on whether unregulated cryptoassets should fall within the financial promotions regime, thereby affording protection for consumers. There is no immediate impact on cryptoasset businesses, but the regulatory landscape is changing.

Background

The UK Financial Services and Markets Act 2000 sets out restrictions on the communication of invitations or inducements to engage in investment activity, such as investing in securities. In brief terms, only those persons who are authorised by the Financial Conduct Authority (FCA) may make such communications, or persons who are making a communication which as been authorised by an authorised person. Incidentally, the ‘approved communications’ exemption is also being reviewed by HM Treasury and our article about that can be found here.

At its core, the restriction on financial promotion is intended to protect consumers from being mis sold products, whether by virtue of being provided with insufficient information or by fraudulent activity or investing in immature or inadequate market infrastructures. Continue reading “UK Government Consultation on the Promotion of Cryptoassets”

HM Treasury Consultation on the regulatory framework for the approval of financial promotions

By Natalie Stewart & Drew Salvest

Natalie A. Stewart
Drew D. Salvest

 

 

 

HM Treasury has opened a consultation regarding a regulatory gateway for authorised firms approving the financial promotions of unauthorised firms. Responses to the consultation are sought by 25 October 2020 and the government is particularly interested in responses from authorised firms currently approving the promotions of unauthorised persons, retail consumers and unauthorised persons which communicate financial promotions. Unauthorised firms who rely on authorised persons to enable them to market products in the UK should consider approaching their usual approving firms to ensure any implementation of this consultation does not inhibit market access.

Regulatory Background

Financial promotions (“Promotions”) are restricted under Section 21 of the Financial Services and Markets Act 2000 (“FSMA”), pursuant to which a person must not, in the course of business, communicate an invitation or inducement to engage in investment activity unless the Promotion has been made or approved by an authorised person or it is exempt. Unauthorised firms often use authorised firms which are authorised to carry on a regulated financial services activity to approve their Promotions in order to comply with the regulations (the “Authorised Persons Approval Route”).

Authorised firms are not required to notify the Financial Conduct Authority (the “FCA”) once they have approved an unauthorised firm’s Promotion, nor does the FCA sign off on approved Promotions before they are communicated to consumers. As such, the FCA is only made aware of potential breaches of the relevant regulations. Continue reading “HM Treasury Consultation on the regulatory framework for the approval of financial promotions”

COVID-19: Update To Future Fund Eligibility

By Sam Pearse

Samuel J. Pearse

02.07.2020

As previously reported (see here), the UK Government launched the Future Fund on 20 May, with the intention of providing financial support to British start-ups. It has proved to be popular, with over £320m of convertible loans to 322 businesses having been approved.

One of the criteria for accessing the Future Fund was that the applicant had to be a UK-incorporated company or a group with a UK ultimate holding company. The UK Treasury has now elected to expand the programme to include certain overseas companies.

It is not uncommon for British start-up businesses to incorporate outside of the UK, or put a non-UK holding company in place, in order to be eligible for local funding programmes. For example, European businesses may incorporate in the US in order to be more attractive to investors in the US and being able to participate in US accelerator programmes. After all, the US seed and venture capital market has much deeper pockets than its European equivalents.

In order to address this, the British Business Bank has announced the expansion of the Future Fund in order to:

accommodate businesses that contribute significantly to the UK economy, but do not have their parent company based in the UK because they participated in a non-UK based accelerator programme”.

Revised eligibility – overview

Continue reading “COVID-19: Update To Future Fund Eligibility”

COVID-19: UK Gov Flexible Furlough Scheme – 1 July 2020 Update

By Nic Hart &  Liam Hutton

Nic Hart

01.07.2020

The Flexible Furlough Scheme (FFS) commenced today July 1st 2020 and you can now submit claims for periods starting on or after 1 July.

GOV.UK published a news story this afternoon announcing this commencement.

As discussed in earlier mail outs the main premise of the FFS is to allow;

“businesses to bring furloughed employees back to work on a part time basis and will be given the flexibility to decide the hours and shift patterns of their employees – with the government continuing to pay 80% of salaries for the hours they do not work.”

The FFS will remain open until the end of October 2020. Continue reading “COVID-19: UK Gov Flexible Furlough Scheme – 1 July 2020 Update”

ECJ Advocate-General Opinion: Disability Discrimination Can Be Found By Comparison With The Treatment Of Other Disabled Employees

By Nic Hart & Liam Hutton

26.06.2020

The Advocate-General of the European Court of Justice has given the opinion in VL (Case C-16/19) that disability discrimination can be found by comparison between the treatment of one group of disabled employees and other disabled employees. Whilst Advocate General Opinions are not binding on the Court, they are commonly regarded as influential, and this Opinion has the potential to create a new basis for comparison in discrimination cases.

The case relates to an employer who paid a monthly allowance to those of its disabled employees who obtained and submitted a disability certificate as evidence of their disability. The issue of discrimination arose because only those who had not already obtained and submitted their certificate were eligible for the allowance.

The employer’s purpose for doing this was that by bringing about an increase in the number of disabled workers employed, the employer would be entitled to a reduction in its contribution to a disability fund.

In the Opinion, the Advocate General addresses whether this could be regarded as discriminatory for the purposes of the Employment Equality Framework Directive, and sheds some light on the applicability of the prohibition of discrimination to the conduct of an employer who treats two groups of disabled individuals differently on the basis of an apparently neutral criterion (in this instance, the date of submission of a disability certificate). Continue reading “ECJ Advocate-General Opinion: Disability Discrimination Can Be Found By Comparison With The Treatment Of Other Disabled Employees”

© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.

The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

Proudly powered by WordPress