ULEZ countdown – what’s the cost for London businesses?

FROM next October ULEZ will extend in London to the North (A406) and South (A205) Circular roads when diesel vehicles must comply with Euro 6 emission standards, while petrol vehicles must meet Euro 4 standards to avoid a charge.

Diesel vans are an essential tool for many small businesses and sole traders, yet many in the new zone at present fail to meet the new emission regulations.

Newly-published research from Lombard evaluates the implications of the expansion for SMEs and sole traders in the capital.

Key Findings

• Almost all (96.2%) vans on UK roads are still powered by diesel
• Out of 53 million light commercial vehicles (LCVs) in the UK, 61% are based inside the capital. That’s 2.77 million in and around London daily
• Nine in 10 (93%) of those are privately owned vehicles, many belonging to London-based SMEs and sole traders
• London sole traders with a single van could expect to pay up to £3,225 a year in ULEZ charges, where heavy vehicle fleets like coach companies could pay upwards of £500,000.
• The new boundaries will split some Boroughs in half.

One van could cost a sole trader an additional £3,000 a year from next October

• Vehicles up to 5 tonnes will have to pay £12.50 if emission standards are not met
• Heavy goods vehicles, with diesel engines not meeting Euro 6, will have to pay £100 to enter ULEZ
• A sole trader with one van can expect to pay upwards of £3,000 a year if operating a business within ULEZ
• A company operating a small fleet of six non-compliant vans can expect an estimated annual cost of £19,350 a year
• Bus and coach companies could be affected the worst, as a fleet of 15 heavy duty engine buses could cost upwards of £500,000 a year to run in the extended zone
• The new zone boundaries will split some Boroughs in half. London Boroughs of Barnet, Ealing and Brent, have the highest amounts of private-owned commercial vehicles, meaning SMEs could have to pay to access their customer base.

Pure-electric models account for 6.4% of total new car registrations, yet 96% of uk vans still powered by diesel

• In the capital alone, the road energy consumption for diesel LCVs in 2018 was 27x higher than for petrol LCVs. Diesel LCVs in London consumed an estimated 403,982 tonnes of oil
• HGVs consumed 6,772,424 tonnes of oil in 2018. That’s the weight of around 376,245 packed London Routemaster buses
• The 77 million LCVs in London release an approximate of 844,850 tonnes of CO2.
• The average tree absorbs CO2 at a rate of 48 pounds per year. London currently has 8m trees, it would need more than six times that amount (39million) to absorb current London LCV CO2 emissions

Q and A with Hiten Sonpal, Director, Future Mobility Group, Natwest and Head of Specialist Sectors, Lombard

1. 1. Considering the government plans to ban diesel vehicles by 2035, do you envision more UK cities introducing ULEZ?

Currently in the UK, five major cities have been mandated by the government to introduce a clean air zone, these are Birmingham, Leeds, Nottingham, Derby and Southampton. The government has also named a further 23 local authorities where it expects pollution levels to reach illegal levels by 2021. They must all carry out a feasibility study to determine whether or not a clean air zone is required. With greater focus on climate and air pollution I wouldn’t be surprised if we see more clean air zones being introduced over the coming years.

2. In your opinion, is the complete replacement of petrol and diesel with electric feasible by 2035?

It really depends on carmakers and government support. Some car makers may find it difficult to make that shift from ICE to EV whereas other car makers have embraced a future in which electric vehicles prevail. We have already see a surge in new registrations for electric vehicles in 2020 but it still forms a small part of the overall market. With new EV models being released by car makers and infrastructure growing slowly I believe over time confidence will grow and people will start to look at the overall economics and the benefits of owning an EV. The government already has initiatives in place such as the plug in car grant, OLEV grant for chargers and 0% benefit in kind tax which is all great but I do believe we need more to help accelerate the transition from ICE to EV.

3. How can London businesses future-proof against further emissions regulations changes?

It is really simple – take the time to explore the change to electric for your business. A lot of times, businesses don’t know what they need until we show it to them and how this could benefit them both economically and environmentally. If you have a business driving in and out of London 5 days a week with a diesel vehicle – congestion charge and ULEZ costs alone equate to c£500 per month, this is the equivalent of a finance payment for an electric van. Per annum this could save the business c£6k. You then have the road fund licence and fuel savings which is on top of this so the economics are greater than people may know.

4. Considering the current circumstances, do you foresee SMEs being able to change their vehicles in the next 12 months?

COVID has had a negative impact on many UK businesses with turnover, profits and cash levels reducing. Business owners will be trying to find ways on how they can become more efficient by reducing costs – electric vehicles can help towards this.

5. Do you envision SMEs with non-ULEZ compliant vehicles, being deterred from doing business within the ULEZ, as a result of rising costs?

In my opinion if businesses don’t start to change with the times then their competition will move further forward and become more competitive from a pricing perspective because of the savings they are making by going electric. I appreciate this may not be the case for all businesses but it is really important to explore how ones business would work with an electric fleet.

6. Do you think current EV technology is capable enough to replace the classic diesel van?

I do believe there are some good options available in today’s market but there is definitely more that can be done to improve on them such as range, charging times, purchase cost, weight. In my opinion electric vans work best in urban areas such as towns and cities – where they are never too far from a plug. However, if you have a van driver that has a consistent route and a known distance that you rarely exceed then again electric vans could be a viable option.

7. What are your thoughts on EV fleets and their maintenance costs when compared to petrol/diesel?

I did read an article earlier this year from Electrek quoting annual tax and maintenance (including MOT’s and servicing) for EV’s are c49% lower than for ICE vehicles while fuel savings are c65% less. The numbers do make sense when you explore the total cost of ownership and carry out a like for like comparison.

8. In your opinion, what needs to shift in business culture to make EVs the go-to vehicle?

It has to start at the top of the chain. In my opinion businesses need to embrace the change now or find it difficult to keep up later down the line.