Diesel Hits £2 a Litre, Inflicting Near £600m Shock on Construction

UK construction has absorbed a near £600 million fuel price shock since the start of the year, with diesel hitting a record £2 a litre yesterday.

The sector burns more than 1 billion litres of diesel annually. The climb from around £1.41 a litre in January has inflated the industry's theoretical annual fuel bill by roughly £590 million — a 42% surge.

The increase is ripping into margins across plant-heavy civils businesses. Muckshifting contractors are among the hardest hit: diesel can account for around 15% of turnover at these firms.

The arithmetic is stark at machine level. A typical 20-tonne excavator consuming 440–500 litres a week now costs around £880–£1,000 to fuel, against roughly £620–£705 at the start of the year.

"This is hitting the industry at a very tough time with a squeeze already on margins," a civils contractor told the Enquirer. "The fuel inflation is going to push a lot of firms to the brink."

"The big muckshifters are being hit by this very hard," the contractor added.

Industry braces for worse

Firms are being warned to prepare for further price rises. Dr Jonathan Owens, an operations and supply chain expert at the University of Salford, has urged businesses to plan for higher diesel prices and to consider a potential £3-a-litre scenario.

Steve Mulholland, chief executive of the Construction Plant-hire Association, said: "Today's record diesel price is a hammer blow for the thousands of family-run plant-hire firms that keep Britain's building sites moving."

"For a capital-intensive sector like plant hire, there is currently no practical alternative to diesel," Mulholland said. "Firms are being forced to pay more for an essential input they simply cannot do without, at a time when many already have little margin left to absorb further cost increases."

He called for government intervention: "The Chancellor must extend the 5p fuel duty cut beyond December and introduce a targeted cut on commercial and off-road diesel at the Budget. Without action, more firms shall go out of business and struggle to invest and grow, let alone play their part in delivering the infrastructure Britain needs."

Structural exposure

Construction is particularly exposed because most site plant lost access to cheaper red diesel in 2022.

The UK has an estimated 25,000–30,000 operated diesel-powered construction machines above five tonnes, with excavators making up more than half the fleet.

Research from BAM sites found around two-thirds of construction diesel is burned by plant, with most of the remainder used in generators for site power, lighting and heating.

With no practical diesel substitute at scale and the fuel duty decision due at the Budget, the sector's exposure now hinges on whether the Chancellor acts — or whether Owens's £3-a-litre scenario becomes the next benchmark firms must price in.