Budget 2025 - Impacts on the industrial and logistics sector considered

The Chancellor’s approach has been to raise taxes through various smaller stealth measures targeting wealthier individual taxpayers. Businesses, which bore the brunt of tax increases last year, have largely been spared, though changes to business rates and minimum wages will impact operating costs for industrial and logistics firms.

One of the key measures for the sector, while not a big revenue raiser, will be the removal of the de minimis threshold, with goods with a value under £135 exempt from paying customs duties. How this changes the behaviour of firms importing low value goods into the UK will be interesting for the sector and could provide a boost for occupier demand.

De minimis demise

The Treasury’s decision to confirm the end of the UK’s de minimis rule, that exempted parcels under £135 from paying customs duties, while delaying implementation until March 2029, has created a strategic window of opportunity for the logistics sector. The demise of de minimis threshold will prompt a rerouting of supply chains through Britain’s warehouses, and act as a catalyst for expansion of onshore fulfilment and logistics networks.

With sub-£135 imports having surged 53% last year to nearly £6 billion, the fiscal case is clear, and logistics operators now have clarity, and crucially, time to prepare. The government expects to raise around £500 million a year once the rule is phased out, a more realistic projection than earlier estimates which failed to factor in anticipated shifts in consumer behaviour.

Yet it is precisely these behavioural shifts that promise a meaningful boost to the industrial and logistics market. Supply chains are expected to move away from fragmented small-parcel inflows toward consolidated container or airfreight shipments with more fulfilment, processing and distribution from within the UK. This shift will stimulate demand for domestic logistics space, generate jobs and give operators confidence to invest in new facilities, automation and inventory strategies.

Business rates ‘super multiplier’ introduced

Properties with Rateable Values above £500,000 will face increased liabilities, with a supplementary 2.8p rate added to the standard multiplier.

The industrial sector will feel the impact of this super multiplier disproportionately, given the high number of larger properties in the sector. According to the latest (2024) data from the VOA, there are 4,300 industrial properties with a rateable value of £500,000 or more.

However, given that legislation allowed Government to apply a surcharge of up to 10p, the 2.8p surcharge is actually far more conservative than it could have been. Furthermore, the reduction in the standard multiplier, from 55.5p to 48p, will actually reduce the overall multiplier for these properties (with an RV over £500,000), from 55.5p to 50.8p.

Yet, while the multipliers are set to reduce, the introduction of these new multipliers coincides with the ratings revaluation in April 2026. Strong rental growth in the sector (between April 2021 and April 2024) has driven up the rateable values by an average of 21%. And it is this historic rental growth that will be most impactful in driving up business rates next year.

Rising business rates will raise the overall occupier cost burden, and this may drag on future rental growth. Locations that can offer tax breaks will be ever more appealing. For example, Freeports, where operators can save on National Insurance contributions and business rate taxes now offer a greater cost base differential and occupiers may increasingly look to these locations.

Another impact may be to deter upgrades and investment in large logistics facilities, particularly where enhancements and investments in a property could be penalised through a higher RV and tax liability. Though some exemptions exist, the Government needs to go further to ensure businesses are not penalised for improvements made.

Fuel Duty remains on ice… for now

Fuel duty remains frozen for a further five months until the end of August 2026. After this point, the five pence cut first brought in back in 2022 will be reversed in a staggered approach, offering logistics firms and drivers only a temporary reprieve.

The logistics sector is overwhelmingly powered by diesel. Unlike cars, where 5.1% are now electric (Department of Transport figures), electric trucks remain scarce.  Latest figures suggest that electric HGVs account for just 0.2% of total fleet.  With a single HGV, running costs are between £20,000 to £60,000 per year to fuel; even a small increase in fuel duty would have a significant impact.

Rising cost for electric fleet

The introduction of Electric Vehicle Excise Duty (eVED) from April 2028 represents a structural change in how the UK treats zero-emission travel. Battery electric cars will attract a new charge of 3 pence per mile in addition to existing road taxes, while plug-in hybrids will pay 1.5 pence per mile. Both rates will increase annually with the Consumer Price Index, ensuring the tax keeps pace with inflation.

Based on annual vehicle mileage of 20,000 miles, a 100-vehicle fleet of battery electric vehicles, would result in a £60,000 additional annual cost from 2028, raising delivery costs for logistics companies, particularly for last-mile logistics, where use of electric vehicles is greatest.

Increased transport infrastructure spending in the 2025 Autumn Budget

The Chancellor pledged over £120 billion in additional capital investment for roads, rail and energy, including £15.6 billion for major city-region transport.

This includes the Lower Thames Crossing project, which is to get an extra £891m in funding, enabling works to commence next year, with a completion date in the 2030s. The crossing, which will connect Tilbury in Essex to Gravesend in Kent, promises to boost road connectivity between the Port of Tilbury and the Midlands as well as reduce congestion by providing a new route and significantly increasing road capacity east of London.

Minimum wage rise

The National Living Wage is set to rise 50p or 4.1% to £12.71 p/h from April.

Labour intensive businesses that are reliant on low cost labour will be impacted by rising operational costs and an increased incentive to invest in automation and reduce reliance on low cost labour.

Capital investment tax reliefs

The government has kept the existing full expensing regime in place, allowing firms to claim 100% tax relief on qualifying capital investments.  Alongside this, the Chancellor announced the introduction of a new 40% first-year allowance for “main-rate” assets. This includes a broad range of plant, tools, machinery, IT systems, racking, conveyors and automation technologies used in logistics, manufacturing and industrial operations, which may not qualify for full expensing.

It particularly benefits companies that invest regularly, but not heavily enough to qualify everything under full expensing. The policy could help to stimulate firms’ spending on logistics automation, manufacturing upgrades, warehouse fit-outs and energy-efficiency improvements.

In addition, from April 2026, the standard writing-down allowance (WDA) for main‑rate assets will reduce from 18% to 14% per annum. The combined effect of a generous year-one allowance but slower relief thereafter is expected to encourage firms to front-load or consolidate investment rather than spread investment incrementally.