Emission zones and the impact on SMEs

Emission zones and the impact on SMEs

With the implementation of the Central London Ultra Low Emission Zone (ULEZ), it has become apparent how far reaching the lack of awareness, amongst the general public, for both what does or doesn’t qualify and what the charges may or not be.

If this hasn’t been thought out in great detail, then has the true impact on businesses been considered? Not just the impact of the first ULEZ zone in London, but the changes due to London’s Low Emission Zone (LEZ) in 2020, the expansion of the area the ULEZ covers in 2021 and rumoured similar zones in other major UK cities?

Who’s affected?

The world’s first Ultra Low Emission Zone has been introduced to specifically tackle toxic air pollution in the nation’s capital. The 24-hour ULEZ will replace the T-charge and operate in the same area. Vehicles driving in, through or commuting to ‘the zone,’ need to meet tighter exhaust emission standards or pay a daily charge (applicable 24 hours a day, 365 days a year).

Vehicles that will be subject to the daily charge include:

  • Motorbikes that do not meet Euro 3 standards.
  • Petrol cars and vans that do not meet Euro 4 standards.
  • Diesel cars, vans, buses, coaches and lorries that do not meet Euro 6 standards.

There will be two ULEZ charge levels, payable in the same way and in addition to London’s Congestion Charge:

  1. £12.50 per day for cars, vans and motorbikes.
  2. £100 per day for lorries, buses and coaches.

There is another consideration for businesses using larger vehicles, as the Low Emission Zone (LEZ) standards will be strengthened (to match the Euro 6 minimum standard required of the ULEZ) from 26 October 2020. From this date, vehicles being used within the wider LEZ that don’t meet the standards will be subject to daily charges ranging from £100 to £300.

Also, from 25 October 2021, the area of the ULEZ will be expanded up to the North and South Circular Roads: an area 18 times larger than the Central London ULEZ, which it is estimated will affect 100,000 cars, 25,000 vans and 3,000 lorries every day.

What impact will the Ultra Low Emission Zone have on SMEs?

For businesses using diesel company cars, vans, mini-buses, lorries, coaches or buses, the daily surcharges could have a massive impact on a company’s cashflow, if they are not using vehicles which meet the required emission standards.

The way to avoid the charges, of course, is to ensure that vehicles needing to travel within the Central London ULEZ (from April 2019), the extended area (from October 2021) or larger vehicles within the LEZ (from October 2020), meet the required standards.

As well as avoiding the daily charges, Euro 6 standard engines have increased engine efficiency, which means better fuel economy. If you run a fleet, decreasing your company’s carbon footprint could have tax benefits too.

Case in point

As an example, over the past few months at Praetura Asset Finance, we have been in close contact with one of our clients, who is the owner of a haulage company. His business relies on delivering products nationwide, with a substantial proportion in the London area. He is now in the process of upgrading 20 vehicles to Euro 6 standard and is doing so gradually over a two-year period.

Due to the credit line we approved with the first deal, the client is safe in the knowledge that the finance is in place. Because the new vehicles are being funding by hire purchase agreements, he can budget for these accordingly, with fixed monthly payments over a set period of time.

This is just the start

It has been reported than London’s ULEZ is just the start, with other cities either ear-marked for similar initiatives or rumoured to be considering them. These include Birmingham, Manchester, Oxford, Leeds and Liverpool.

So, whether your business requires travel to the London area or not, the time to start evaluating the environmental impact of your company’s vehicles (if you haven’t already started doing so), is now.

Another very important consideration, is the financial impact the necessary upgrades may have and an evaluation of the most cost-effective way to finance this. This is where the options that asset finance offers, could provide an ideal solution.

Through hire purchase or lease arrangements, you avoid the huge dent in your business’s cashflow that paying for new vehicles upfront would make. It is better for budgeting with fixed monthly payments over a set period of time, there are potential tax benefits and it’s quick: the funds can be made available within a matter of days, with arrangements tailored to the specific needs of your business. It might also be possible to agree a credit line, so upgrades for multiple vehicles can be done gradually.

Extra help from Praetura Asset Finance

Air pollution contributes to 40,000 deaths a year in the UK and causes long term health problems for hundreds of thousands of people.

At Praetura Asset Finance, we recognise and commend SMEs endeavouring to reduce the emissions and carbon footprint that their company’s vehicles leave. For those looking to upgrade to newer more environmentally friendly vehicles, be they electric, hybrid or Euro 6 standard, we will be offering preferentially reduced rates where possible*.


For more information about finance leasing or hire purchase of vehicles for SMEs, ask your broker or financial adviser to refer you to Praetura Asset Finance today.


*Subject to status, terms and conditions apply.

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