Politics Home Article | Time to talk tax: the cumulative burden on business

With the UK tax burden at historic highs and demand for materials at historic lows, the mineral products sector is at risk of a business confidence and investment crisis. Substantial tax increases and increasing regulatory costs, set against the backdrop of low construction activity and demand, increase the sector’s concern about remaining competitive.

Mineral products are the foundation of the UK’s built environment. Our materials – aggregates, concrete, asphalt, cement, lime and a wide range of other minerals – are essential for the delivery of homes, buildings and infrastructure, and critical to other industries – steel, glass, ceramics, paper, chemicals, pharmaceuticals and food production. This range of activity in our sector exposes us to multiple layers of taxation and cost.

Until 2022, the tax burden on business was broadly stable compared to the previous five years. However, rapid-fire changes since then are resulting in significantly higher costs, with the combined tax burden expected to have risen by just under 30 per cent (26-29 per cent) since that time. For many of our members, in a time of sustained market weakness, this weight is becoming intolerable.

The largest tax burden increase has been in business rates, up 58 per cent compared to 2021/22. As with other businesses, rates are a significant fixed cost for industrial sites. Recent revaluations and changes to the multipliers structure have led to significant increases in liabilities for minerals products sites.

Cement works face the largest increase in their rates, at approximately £38,000 per plant. This is at a time when cement production is at its lowest since 1950, and low sales are being undercut by cheap and carbon-intensive foreign imports. Cement, the main ingredient in concrete, is vital for delivering the government’s growth and infrastructure plans, as well as achieving their industrial ambitions.

The sector has also endured hefty rises in more specific taxes that fewer sectors are exposed to. With heavy plant and vehicles for transportation being essential, the combined effect of the end of red diesel and the scheduled removal of the 5ppl duty cut has resulted in a significant rise in fuel costs. With an effective duty rate change of 54 per cent per litre, this will cost the industry £48m in extra duty a year.

Increased costs without market improvements are a direct threat to the long-term viability of mineral products businesses. They are facing the difficult decisions that could result in a permanent reduction in the capacity of the UK to supply itself with essential construction materials. Not only will we lose production capacity in minerals, but we will also lose sites and jobs. That will hamper economic recovery in the short term and growth and investment into the future.

Businesses in our sector directly employ 89,000 people and support 3.4m jobs in the supply chain. The pressure from a rising tax burden threatens these jobs, deters investment and could even undermine the future supply of essential domestic minerals. This will all affect the wider UK economy.

While rapid tax increases impact all industries, the burden on the mineral products sector will have a lasting effect on the country’s infrastructure and housebuilding goals. Caught under the combined weight of an increasing tax burden and falling demand for materials, our foundational industry needs reinforcement to ensure we can meet future material demand from domestic sources.