After another difficult year for the UK economy, what does 2024 promise for the forecourt sector? Judging by events before and during the festive season, there is plenty to be concerned about, amid glimmers of hope and progress.
Against more than 12 months of falling fuel prices, from near-record highs in 2022, recent attacks on shipping in the Red Sea have led to concerns this trend might now reverse. Consumer confidence going into 2024 remains fragile, with interest rates hikes pushing up mortgage costs for many, and UK economic growth stagnant at best.
Rishi Sunak’s government continues to send mixed messages on the environment, in September pushing back by five years a ban on new sales of new diesel and petrol cars that was due to come into effect in 2030, although its zero-emission vehicle mandate puts ambitious targets on sales of electric vehicles.
Ministers want to give the industry more time to invest in charging infrastructure. Certainly, the roll-out of chargepoints seems to be happening apace, with 43% more public stations available this year than last, putting the country on track for 300,000 such installations by 2030, according to the government. An industry that was perhaps once sceptical about the transition from combustion engines is embracing the electric revolution.
Whether this government is still in place by this time next year remains to be seen. A general election must take place by early 2025, although it is likely to happen sooner. Labour’s Sir Keir Starmer has pledged to upend many of Sunak’s policies, including by bringing in the ban on sales of petrol and diesel cars much earlier.
Aside from the economy and the environment, crime has soared up the agenda for the sector in 2023 – particularly shoplifting and fuel theft, where anecdotal as well as official evidence suggests it is on the increase. Many forecourt owners are demanding that ministers and local police forces take the epidemic more seriously.
We asked seven influential industry players to share their aspirations, worries, and predictions for the year ahead.
Gordon Balmer, executive director at the PRA and CWA:
“A notable issue in 2023 was the report into ‘Road Fuel Pricing in the UK’ published in July, by the Competition and Markets Authority (CMA). Key recommendations were to provide motorists with more “price transparency” and the establishment of a fuel market monitor. To bring these initiatives into law they will need to be included in the Digital Markets, Competition and Consumers Bill which is expected to be laid before Parliament in the late spring. If this parliament survives to enact this is anyone’s guess, with some pundits predicting a general election early this year. However, the current opposition have signalled that they will continue with this legislation. Therefore, expect to see a permanent price transparency scheme being set up and a fuel market monitor in the autumn. The PRA is working closely with the government on this to ensure our members are properly represented as this develops.
“In his autumn statement the Chancellor announced the biggest increases ever to the National Living Wage from April 2024. This will add significant cost increases for forecourt operators as they continue to struggle to recruit and retain staff. Energy prices are also a factor and although we have seen the worst of the price spike caused by the war in Ukraine some operators are still locked into very expensive tariffs. However as these unwind prices should start to fall. In 2024 work will start on a business rate revaluation and the PRA will continue to work with the government’s Valuation Office Agency on this matter.
“Forecourt crime, drive-offs, no means to pay and shoplifting will still dog the industry in 2024. However, if Labour are successful at a general election, they have said they will be asking police forces to remove any threshold around so called “low value crime” and investigate these incidents. In addition, the PRA continues to work with the police and Home Office to attempt to speed up the process to obtain vehicle keeper details critical in getting money back for fuel retailers.
“Net zero will also be a key theme especially for any incoming government following the latest COP 28 held in Dubai. There will be increased pressure on the car manufacturers to sell more electric vehicles (EVs) with financial penalties if they don’t, and so expect to see discounts to encourage the motorist to buy them. However, many people are still concerned about the state of the public charging network and with the pressure on household budgets many will opt for a quality secondhand ICE car rather than an EV. Many forecourt operators are still debating whether to invest in EV charging with a long payback on investment and some report that they face a struggle with planning permission and the distribution network operators to deliver the level of power required.
“I am also responsible for the Car Wash Association, and in 2023 many members reported record returns from their valeting business. We have seen increased interest from companies wishing to invest in car washing and members of the association replacing existing equipment with state-of-the-art technology or low-cost, high margin jet washes. I expect this will continue into 2024 especially if we can reduce the number of non-compliant hand car washes.”
Wayne Harrand, retail director at Top 50 independent MPK Garages, based in the Midlands:
“I am expecting that the economy will improve and that we will start to see some contraction in wholesale pricing of grocery products, lower energy costs, and a slowdown in fuel prices at the pump. It would be beneficial for retailers and consumers to see some stabilisation of crude oil prices globally. The RAC continues to state that forecourts are inflating prices to the consumer, but it needs to take into consideration the base price to operate a petrol forecourt station with all the labour, electricity, and product costs all under inflationary pressure.
“From April, forecourts will also have to factor in paying a new minimum rate of £11.44 an hour for staff aged over 21. At MPK Garages we have increased all colleagues pay regardless of age, above the new national minimum wage of £11.44, with all 320 colleagues receiving this increase in their December pay packet. We understand how tough the financial climate is for our colleagues and wanted to support families over the challenging winter months by providing this increase now at this critical time for our teams.
“We are keen to see innovative products return in the food and drink sector, particularly in growth areas like frozen, food-to-go and healthier food ranges.
“MPK Garages is still reviewing the electric vehicle (EV) market and will watch over the next 12 months how this opportunity develops. For now, although EV charging could be a future opportunity, the cost of electric cars puts them out of reach of the average consumer, still over 57% of the country do not have off street parking and a number of motorists have anxiety around driving EVs long-distance.
“We’d really like to see more activity in hydrogen for heavy goods in the next 12 months, and other alternative fuels becoming more visible in the marketplace including liquid replacements and supplements to put into fuel to reduce carbon emission.”
Sonya Adams, VP mobility and convenience retail UK, BP:
“In 2024 our primary focus remains on ensuring the safety and security of our colleagues and our customers. This must come first – always.
“To address the challenges highlighted in media reports about antisocial behaviour in the retail sector we must work together in a collaborative and coordinated effort. We need multiple stakeholders involved and there is not likely to be one solution on its own. However, at BP we will continue to trial new measures and technology to improve the security of our colleagues and customers.
“The increase in electric vehicle adoption will continue to drive an evolution in the forecourt sector – both in terms of network growth and enriching customer offers. The way people are travelling is changing, but customers still want to eat and drink when on the move. Recognising these evolving travel habits of our customers we are dedicated to providing convenient products and services that align with their busy lifestyles.
“Anticipating continued market growth in convenience channels for 2024, as witnessed in 2023, with over half of BP customers in the UK now visiting our retail stores purely to buy food, we’re excited about the development of food offerings for now and later across the sector. Despite the competitive retail landscape, we are committed to delivering value for money offers, navigating challenges such as pricing, promotions and costs against a backdrop of a tight labour market and energy price fluctuations.”
Ian Taylor, Spar UK retail director:
“The forecourt sector is dynamic and is constantly innovating in a very fast-moving industry and we are confident that it will continue to adapt to the ever-changing needs of consumers.
“The shift in consumer behaviour and how they shop, opens up a huge opportunity for the sector. Shoppers have got used to using their local convenience stores in a different manner and speedy developments in retail technology have meant that shopping and payments can be done in a variety of ways.
“Food-to-go remains an area that every forecourt needs to offer, so developing solutions that retailers can execute is something that needs focus.
“The key for retailers now is personalisation and blending digital and physical experiences to meet consumers’ expectations.
“However, where there is opportunity, there is also a reason for apprehension.
“As the growing number of fuel thefts from forecourts and crime within stores increases, forecourt retailers need to remain vigilant and consider what investments need to be made to prevent these from happening.
“Increases in all costs including the national living wage and the transparency of fuel pricing are big threats to the sector. Knowing when to make the investment into electric vehicles can also affect the profitability of the forecourt.
“A decline in tobacco sales and possible changes to vape legislation could change the success of the category.
“The forecourt sector is tight-knit and has shown that in many cases it can be resilient. Fuel retailers have built a great community and continue to share best practice. Retailers using their networks and trade associations will continue to keep the sector strong.”
James Lowman, chief executive of the ACS:
“Looking ahead to 2024 (and the impending general election) we foresee key battleground areas that local shops should be keeping a close eye on. Firstly, for the 8,000-plus forecourt retailers operating in our sector, there will be a lot of attention on whether the roadmap to 2035 moves after the election and whether the next government wants to push an accelerated green agenda to stop the sale of new petrol and diesel vehicles. This, plus addressing the challenges with electric charging infrastructure will be key for the main parties.
“2023 saw a boost in the profile of shop theft in the media and with senior figures on both sides of the aisle, with commitments from police and crime commissioners across England and Wales to tackle the issue of theft and abuse against local shops.
“Up to this year, the Low Pay Commission has been tasked with reaching two thirds of median earnings, but beyond that there’s no formal remit to adhere to - we expect employment costs to be a hot topic on store visits with candidates.
“And finally, a new (or revised) public health strategy is likely to be a cornerstone of the Labour manifesto and will surely make an appearance for the Conservatives, so it’s up to us to explain the impact that any future interventions will have on the sector. Let us know if you’d like to host a store visit in 2024 and speak to prospective candidates about what local shops need from the next government.”
Tom Hurst, UK country manager at Fastned:
“Even though the UK government has rolled back on its ban of new sales of petrol and diesel cars, all hope is not lost for the electric vehicle (EV) transition. With the Department forTransport mandating in 2024 that 22% of cars and 10% of vans sold by manufacturers must be electric, I’m confident that we’ll continue to see an increase in EVs on the road next year.
“As more and more drivers turn electric, customers will need reliable and easy to use charging facilities, and will be looking for services that are familiar to them. Forecourts are primed and ready to fill this need. With drive-through formats and convenient locations off major roads and highways, forecourts have the opportunity to make the move from petrol to electric seamless for drivers.
“That’s why, in 2024, we’ll be proactively engaging with the forecourt sector to better understand customers’ needs and to find ways to work together. The future of mobility in the UK is electric. The forecourt sector will need to prepare itself for this shift and work at pace to get ahead of competitors on non-traditional sites. We’re committed to working collaboratively with all sectors with a stake in the transition to make sure EV drivers in the UK get the charging network they deserve.”
Richard Roberts, managing director of Trident Honda, a family-owned forecourt, new and used car dealership, and repair centre near Woking in Surrey. Richard is also a member of the National Franchised Dealers Association and chair of its UK south working group:
“The move towards electric installations will continue to vary in 2024. It is a simple decision when it comes to motorway service stations, but for sites like ours, just off the motorway and in a wealthy area where people are more likely to have home charging, we are not planning investing in charging in 2024, and unlikely to take the plunge until a few years. We do have plenty of lower-priced housing where charging facilities are constrained, and these may well need charging facilities in the future, but they are unlikely to be early adopters of electric vehicles (EVs).
“Fuel will continue to move away from diesel in 2024, but unleaded petrol will remain for years to come, particularly driven by those without the money to afford an EV, or ability to home charge.
“The level of local supply of electrics still will preclude many sites from installing charging points. There is a belief in the industry that you need to operate a minimum of four chargers, otherwise EV drivers won’t come to you as they will expect the chargers to be busy. And in the future, forecourts will need to increase this number, with more EVs on the road driven by the zero emissions vehicle (ZEV) mandate.
“Given the issues facing the EV market there is still a lack of certainty as to whether the government of the day will be able to continue with the ZEV mandate numbers, as with the lack of infrastructure and the large-scale growth of EVs on the road there appears to be a car crash looming.
“Forecourt operators are concerned about installing the right charging option. To install the wrong system and get into a VHS or Betamax position would be an expensive mistake to make.
“2024 will see a continued rejigging of forecourt sites to drive an income from customers spending more time on site whilst charging, and because of this cafeterias will replace traditional forecourt shops.”
