BUDGET 2025 – WHAT IT MEANS FOR COLD CHAIN BUSINESSES
Executive Summary
The Autumn Budget delivered a challenging picture for the cold chain sector. While important support for capital investment was confirmed – including a new 40% First-Year Allowance for leased assets, expectations for full expensing on leased equipment were unmet, limiting the sector’s cashflow benefits. Meanwhile, rising operating costs continue to loom large; business rates reforms will see higher multipliers for large properties – without exemptions for cold stores, and employment and fuel costs are also set to rise further.
The following sections provide detailed insights on these key Budget elements and their implications for the sector.
Message From the Cold Chain Federation
“The last two budget outcomes have proved challenging for industry and, of course, the cold chain. It is clear that increases in food and pharma inflation will be the unintended consequence of various tax and employment cost rises impacting our sector.
It is this consequence that differentiates us from other sectors, and one the Cold Chain Federation will continue to campaign on with the government in the coming months.
Reemphasising the criticality of the cold chain will also act as a strong voice for government to fully understand the impact of taxing rather than supporting the sector.”
— Phil Pluck CEO, Cold Chain Federation
Business Rates
Business rates reform was one of the most anticipated headline policy areas of the Autumn Budget. Against the backdrop of the Government’s commitment to support and revive the high street, the Chancellor confirmed a new higher-rate multiplier for high-value properties with a rateable value (RV) above £500,000. This multiplier will be 2.8p above the national standard rate, reaching 50.8p in 2026-27. Alongside this, the Valuation Office completed updated Rateable Values for all business premises, with most properties seeing increases and many cold-storage sites moving into the £500,000+ category.
Due to the combination of higher rates and updated rateable values, many cold store operators will face the new high-value multiplier from April 2026, with the largest operators bearing the greatest impact. As a result, our sector faces an estimated £10-20 million rise in business rates costs – costs that will inevitably feed into consumer inflation on essential products. Whilst our lobbying efforts – which warned of the detrimental effects that higher business rates on essential cold-storage sites would have on this vital sector, successfully reduced this increase from a rumoured 10p to 2.8p and secured £2.3 billion in transitional relief to ease the burden for some members during the first three years, the reforms still impose a substantial financial burden on our critical sector.
In an attempt to ease pressures on smaller businesses, the Government has expanded Small Business Rates Relief (SBRR) tapering to smooth out the previous “cliff-edge” effects, meaning that instead of losing relief entirely once a property exceeds the £12,000-£15,000 rateable value band, businesses will see a more gradual increase in liability as their premises rise in value. However, most cold chain properties fall well above these RV thresholds and will not benefit from this relief.
Additionally, the Chancellor confirmed that preferential multipliers for retail, hospitality, and leisure (RHL) properties will be made permanent from April 2026. These reduced rates, set 5p lower than the national multipliers, apply only to RHL properties under £500,000 RV and exclude logistics, warehousing and cold storage, despite their central role in national food and pharmaceutical supply chains. While many small businesses and high-street sectors will benefit from these reforms, the financial burden is effectively being shifted onto large commercial properties – including numerous cold stores.
We continue to stand by the position outlined in our pre-budget submissions: cold storage businesses should be exempt from the new higher business rates due to their vital role in protecting the nation’s food and pharmaceutical supplies. While some smaller operators may benefit from the latest reforms, the larger cold stores – which form the backbone of UK food and pharmaceutical distribution – will shoulder the bulk of the financial impact
As stated in our Business Rates correspondence following the budget, we will continue to lobby for a full exemption for our members ahead of the new rates in April 2026, and beyond if needed.
Fuel Duty
The Budget confirmed that the 5 pence per litre (ppl) cut in Fuel Duty – first introduced in March 2022 – will be extended until the end of August 2026. Additionally, the scheduled inflation-linked increase will be cancelled during this period. This extension offers short-term stability and some relief for fuel-dependent industries, including cold chain operators facing high operating costs.
However, the Government has outlined a clear plan to phase fuel duty back to its pre-2022 levels starting in autumn 2026. From that point, fuel duty will increase in stages: 1p per litre in September 2026, 2p in December 2026 and a further 2p in March 2027. By spring 2027, fuel duty will return to the rates before the temporary cut, marking the first real-terms rise in petrol and diesel duty in 15 years.
For the cold chain sector, this phased return has significant implications. Diesel remains the primary fuel for temperature-controlled distribution – powering HGVs and refrigerated trailers, and with deliveries running 24/7 to meet strict time-sensitive schedules nationwide even small duty increases can lead to substantial cost rises for operators.
If the full 5p per litre fuel duty increase is passed through directly to wholesale prices, TRUs alone would face an estimated £10.7m in additional annual costs. An average refrigerated HGV, consuming around 25,000 litres of diesel a year, would see an extra £1,250 in annual fuel costs. With approximately 100,000 refrigerated vehicles operating in the UK, the total cost impact could add up to around £125 million per year. Combined with TRU costs, the cold chain sector could therefore face approximately £135.7m in extra annual fuel duty once the full 5p is reinstated.
Most operators can pass fuel increases on to customers, but these costs ultimately feed into food prices and inflation. While the extended freeze offers relief until August 2026, the scheduled increases from September onward will add to already rising employment, energy and business-rates costs.
Employer Costs and National Insurance
The Budget provided no adjustment to employer-facing labour taxes, despite strong lobbying from labour-intensive sectors. Employer National Insurance (NI) remains at 15%, following its rise from 13.8% in 2024. Additionally, the lower earnings threshold for employer NIC remains fixed at £5,000 (down from £9,100), locked in until 2031. This will increase fiscal drag and push more employees into higher tax bands – raising employer costs.
The government also announced a new restriction on employee pension contributions, impacting all employers offering pension salary sacrifice schemes. From 6 April 2029, there will be a £2,000 annual cap on salary-sacrifice pension contributions exempt from National Insurance. Any contributions above this threshold will attract employer NI and employee NIC at the standard rates. This change will add complexity and further costs for employers who have adopted pension salary sacrifice.
As we highlighted in our pre-budget letter to the Chancellor in August 2025, rising employer NIC and National Living Wage commitments have already added over £620 million in costs to the cold chain sector. The lack of relief in this Budget means that cold chain businesses – particularly labour-intensive operations like large-scale warehousing and transport fleets – will continue to face sustained pressure from increasing wage and employment costs.
National Living Wage
The Budget confirmed a further increase to the National Living Wage (NLW) from April 2026, in line with the Government’s commitment to deliver a “genuine living wage” and maintain wage growth above inflation. The NLW will rise to £12.62 per hour, up from £11.44 in 2025 – an increase of just over 4%.The Low Pay Commission’s indicative path suggests the NLW could reach £13.15 by 2027, implying a further 10-15% rise in total wage bills for many cold chain employers over the next two years even before NIC is applied.
When combined with the frozen employer NIC threshold and the rate held at 15%, the rise in NLW compounds the ongoing increase in employment costs. The Budget provides no relief to offset this, leaving the sector facing continued cost pressures alongside higher business rates and rising fuel costs.
Capital Investment & Full Expensing
The Budget delivered partial progress on investment incentives, with the Chancellor confirming that full expensing (a 100% first-year write-off for qualifying main-rate plant and machinery) will continue in its existing form for outright purchases. However, expectations that the Government would extend full expensing to leased assets were only partially met. Instead, a new 40% First-Year Allowance (FYA) will apply to leased plant and machinery from 1 January 2026. Under this scheme, companies can deduct 40% of the asset value upfront, with the remaining 60% written down at standard rates. For the cold chain, the impact is mixed. Leased refrigeration systems, warehouse control software, electric or alternative-fuel vehicles and warehouse automation or energy-management technologies will now benefit from faster tax relief, improving investment viability for upgrading equipment and reducing emissions without requiring full upfront capital.
However, the measure falls short of what capital-intensive sectors have long been calling for. Large, long-term projects – such as full-site refrigeration replacements or new-build cold stores that can cost tens of millions – won’t get the same cashflow boost that full expensing would have offered. The different treatment of purchased and leased assets could also shape how major operators choose to invest in future. Overall, the Budget is a step in the right direction, but it’s not the kind of incentive that will unlock the level of net-zero investment the sector needs.
Additional Risks to Cold Chain Supply Costs
The government is also expanding the Soft Drinks Industry Levy (sugar tax) to cover certain milk-based drinks for the first time. From 1 January 2028, pre-packaged milkshakes, flavoured milks, sweetened yoghurt drinks, ready-to-drink coffees and milk-alternative drinks with added sugar will become subject to the levy. The sugar threshold triggering the levy will be lowered from 5g to 4.5g of sugar per 100 ml, meaning many more products will fall under the tax.
Because these products are part of the cold chain, this change could lead to either cost increases (if producers pass the tax on) or reformulation (to reduce sugar), both of which may have knock-on effects on prices and supply-chain operations.
Industry Feedback
Following the Autumn Budget, we invited feedback from the cold chain sector on their biggest concerns moving forward.
The survey revealed that the rise in the National Living Wage was the most pressing issue for a third of respondents, reflecting widespread worry over increased employment costs. Equally significant were concerns about tax changes and increased business rates, each accounting for a quarter of those surveyed. Future fuel costs also emerged as a notable concern for many.
This feedback highlights the mounting financial pressures facing the sector, especially given its labour-intensive operations and vital role in the nation’s food and pharmaceutical supply chains. These results underline the critical need for continued advocacy to ensure that government policies support the cold chain sector amid these growing cost challenges.
Looking Ahead
We will continue to monitor upcoming policy developments, especially as the new business rates take effect in April 2026 and fuel duty increases begin later next year. Our focus will remain on advocating for fair treatment of cold storage businesses, pushing for exemptions where needed and supporting members through these growing cost pressures. We’ll continue to provide timely updates and guidance as more details emerge ahead of key policy changes.
FOR FURTHER INFORMATION OR FEEDBACK ON ANY ISSUES IN THIS BRIEFING PLEASE CONTACT MADDY COUPE POLICY MANAGER [email protected].
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