If you read nothing else, read this…
- Environmental regulations and an increased focus on reducing carbon footprints have impacted the shape of the fleet landscape in recent years.
- Some international organisations are looking to harmonise their fleet policy across geographical locations.
- The industry has seen a shifting emphasis towards mobility.
Regulation and compliance
Paul Hollick, chairman of the Institute of Car Fleet Management (ICFM), says compliance is one of the key factors impacting the fleet landscape in recent years. “While not all fleet managers have necessarily been affected by it, regulation, particularly coming out of the European Union around CO2 measures, has changed the landscape significantly,” he explains. ”This has meant that manufacturers have had to produce lower-CO2 cars, which means everyone has been driven to a more carbon-focused approach, which is also linked to cost savings.
“This has rapidly changed the architecture [of the fleet landscape] and, when [seen alongside] factors such as corporate manslaughter and those areas around duty of care, it means that fleet managers have had a lot more things to think about.”
Thinking green
This environmental focus is not just limited to compliance; it is becoming an increasingly weightier consideration for many organisations looking at their company car schemes, as well as staff travel more generally. Indeed, the range of green and lower-emission cars available through company car schemes, which can be complemented by policies to cap the amount of CO2 that company cars produce, can help employers to curb their carbon footprint while also providing tax advantages.
Colin Tourick, Grant Thornton Professor of automotive management at the University of Buckingham Business School, says: “I’ve seen an increasing number of employers putting in rules, processes and procedures to ensure that every decision about somebody moving from A to B is made to optimise cost and optimise CO2 at the same time.”
Mobility and data capture
According to John Pryor, chairman of the Association of Car Fleet Management (ACFO), this greater onus on staff movement relates to the widening range of company car schemes available and a growing awareness of this variety. “It’s not just the singular company car [any more], it’s a change to mobility and how organisations are moving people around,” explains Pryor. “Fleets are moving more into mobility. We talk of total cost of ownership, but it’s also total cost of trip.”
One of the factors that feeds into cost-control calculations and that can help determine the effectiveness of an organisation’s staff mobility strategy is mileage capture and management.
Hollick explains: “There is definitely a move at the moment, not just in the UK but across Europe, to regulating and controlling mileages and distances more aggressively, as well as understanding what exactly the split is between private and business [use].”
Increasingly advanced telematics systems provide further opportunities for employers to control costs and tailor their car and travel policies according to the requirements of their employees and the business.
Toby Poston, director of communications and external relations at the British Vehicle Rental and Leasing Association (BVRLA), says: “More and more cars are connected now and getting in-built telematics and, over time, more and more of that data will become available.”
However, he adds that some organisations may be unsure of how they can access and use this information, particularly as they may not have procedures in place for managing data of this kind.
Shifting priorities?
In light of trends such as the increased weight put on environmental considerations and compliance, not as much importance may be placed on employee choice in some instances, says John Webb, principal consultant at Lex Autolease. “It is one of the areas that appears to be getting left behind in some of the decision-making. What with the focus on cost, environment and regulation, it may be that choice has moved very low down the list.”
While it may risk being eclipsed by other factors, providing staff with greater choice in terms of car and policy type can help to boost employee engagement and take-up rates (see pages 12-13).
The range of funding types, products and services offered by the fleet industry can cater to the needs of diverse workforces and organisations, as well as responding to another trend: a shift towards car usage.
Hollick explains: ”The market is moving towards a usage model rather than a pure ownership model, so we will therefore likely see fewer four-to-five year contracts and perhaps see more fluidity.”
Poston adds: “There is a move to a growing awareness and popularity of car user-ship, and the cachet of ownership is decreasing.”
Meanwhile, when it comes to fleet funding, Webb says: “Because of recent tax changes, there’s a bit more focus back on employee car ownership (Eco) schemes.”
International alignment
Harmonising fleet policy across geographical locations is also becoming more common, particularly among organisations that operate internationally.
Alastair Kendrick, director at MHA MacIntyre Hudson, says: “[Many international firms] are pushing for more international fleet agreements. So rather than just having a specific car policy for the UK, it’s driven out of the US for the whole of Europe, Middle East and Africa (EMEA), for example.”
While this could have implications for compliance considering local differences in legislation, it could also result in a more centralised procurement process. As Kendrick adds: “The fleet decision-maker may no longer sit in the UK.”
However, Lex Autolease’s Webb says that the fleet decision-making process has also been affected by a greater focus on cost during the economic downturn. One of the outcomes of this is that “the procurement profession has taken an increasing role in fleet decisions”.
Policy and guidance
One area of concern is the level of support that the government provides to the industry. Webb says: ”We’ve got a big challenge, and we have had for some time now, in that elements of the government are not necessarily joined up around policy-making.”
More consistency, certainty and stability for the long term could better support the fleet industry and drive its future growth and development. Webb adds: “Fleet operators need to have a long-term view. We plan for the long term. Any fleet manager worth their salt will be looking at cycles of at least three-to-four years or five years and longer. How do we plan for that if HM Revenue and Customs’ (HMRC’s) guidance or strategy is unsure?”
The BVRLA’s Poston explains that local policy could also present a challenge to the industry. “One of the issues that we’ve got is around the devolution of transport.”
Regional policy relating to issues such as air quality and emissions, or even workplace parking, could have an impact on the fleet industry.
Poston adds that, while such devolution could be a good idea, there needs to be “some sort of framework so that fleets operating on a national basis don’t have to regionalise their [offering].”
Summer Budget announcements with a bearing on the fleet industry and company car schemes
Vehicle excise duty:
The vehicle excise duty system is being reformed for all new cars registered from April 2017. First year rates will depend on the car’s carbon dioxide (CO2) emissions. Thereafter there will be a flat standard rate of £140 a year. Cars with a 0 gCO2/km emission rate are the only exception, with both first year and standard rates set at £0. Cars with a list price above £40,000 will have to pay an annual supplement of £310 for the first five years in which the standard rate applies.
From 2020-21, vehicle excise duty will be invested into the road network via a new Roads Fund.
Salary sacrifice:
While the Chancellor made no direct reference to salary sacrifice schemes in his speech, the Summer Budget 2015 Policy paper states: ‘Salary sacrifice arrangements can allow some employees and employers to reduce the income tax and national insurance that they pay on remuneration. They are becoming increasingly popular and the cost to the taxpayer is rising. The government will actively monitor the growth of these schemes and their effect on tax receipts.’
Corporation tax:
The corporation tax rate will be reduced from 20% to 19% in 2017, before falling to 18% in 2020. According to the Budget documents, cutting the corporation tax rate will give the UK the lowest rate of corporation tax in the G20 and save businesses £6.6 billion by 2021.
Insurance premium tax:
The standard rate of insurance premium tax will increase from 6% to 9.5%, effective from November 2015. The Summer Budget 2015 Policy paper notes: ‘The insurance premium tax standard rate will remain lower than that of many other EU member states.’
Company car tax:
Company car tax rates remain in line with the March 2015 Budget announcements, with the percentage list price subject to tax increasing by 3% in 2019-20 for cars emitting more than 75 gCO2/km. The maximum percentage will be capped at 37%. There will be a three percentage point differential between the 0-50 gCO2/km and 51-75 gCO2/km bands and between the 51-75 gCO2/km and 76-94 gCO2/km bands.
Fuel duty:
Chancellor George Osborne confirmed that fuel duty will remain frozen this year. This follows the government’s decision to halt the fuel duty increase planned for September as announced in the March 2015 Budget.
MOTs:
Subject to public consultation and cost-benefit evaluation, new cars and motorbikes will be given a year-long extension on their first MOT test. Osborne said: “We will consult on extending the deadline for new cars and motorbikes to have their first MOT test from three years to four years, which would save motorists over £100 million a year.”
