As the cost of doing business has risen in recent years, business owners may be concerned about the cost implications of environmental and climate change targets. This article looks at the impact on businesse of Clean Air Zones (CAZ) and identifies support to help you manage the additional costs.

What are Clean Air Zones?

A Clean Air Zone is an area in and around a major city that has been designated for special action to improve the air quality. While the UK Government have recently extended the deadline on the ban on the sale of new petrol and diesel cars (pushed back from 2030 to 2035), the government are still committed to reaching Net Zero by 2050.


Why are Clean Air Zones needed?

Clean Air Zones are important for helping to reduce damaging emissions from heavy traffic, enabling people, animals, and plants to live more healthily. Clean Air Zones can also help reduce the incidence of breathing-related problems such as asthma attacks by decreasing the level of pollution. 

According to GOV.UK, road transport accounted for 27% of emissions of nitrogen oxides in the UK in 2021. There is a downward trend in emissions from road transport due to the replacement of older vehicles in the vehicle fleet with newer vehicles that meet stricter emissions standards. Clean Air Zones are expected to contribute to a continued downward trend in nitrogen oxide emissions.


Which cities have established Clean Air Zones?

Some UK cities have already implemented Clean Air Zones including London and Birmingham. Click on this link to find out the daily charges in each city. Other cities, such as Leeds, have scrapped plans for chargeable zones because there had already been a significant shift to environmentally friendly vehicles. For more information on different cities’ Clean Air Zones, see this map, produced by Fleet News.

Reducing the financial impact of Clean Air Zones for businesses

With Clean Air Zones becoming more common across the country as the Government works towards its carbon neutrality goal by 2050, business owners may want to learn about ways to reduce the additional costs of Clean Air Zones.

Below are several options to help you contain the additional costs, depending on your business circumstances:

Businesses driving into the zone
If you regularly need to drive into a Clean Air Zone to conduct business, you may incur increased costs if your vehicles do not meet the minimum standard for emissions. You will need to register each business vehicle for the schemes you’ll be driving in. Set up an online account.

Alternatively, you may choose to replan your journeys to avoid travelling through a Clean Air Zone.

You may choose to upgrade your business vehicles so that they meet emissions regulations, and you won’t have to pay Clean Air Zone charges. This could be a significant investment, but there are grants and incentives available, listed below.

Businesses located in the zone
For businesses located within a Clean Air Zone, there’s a further consideration. Clean Air Zones reduce the amount of vehicles entering the area. The additional cost of driving into the zone could have an adverse impact on the number of customers willing to visit your business.

There is a particular focus on HGVs and LGVs when it comes to chargeable Clean Air Zones. HGVs, referring to trucks with a gross mass exceeding 3.5 tons, contributed 20% of UK domestic transport CO2 emissions in 2021 PDF (997KB) . Given this substantial contribution, the road-based freight and logistics sectors are considered pivotal in reaching the UK's ambitious 2050 Net Zero emissions target. However, decarbonising the movement of freight by road is challenging, primarily due to the substantial weight of HGVs and their cargo, coupled with the often necessary undertaking of long-distance journeys.

Glenn Bemment, Head of Sectors & Regional Development, Business and Commercial Banking at Lloyds Bank, said, “Clean Air Zones are an important tool for improving air quality and helping the UK meet its Net Zero targets. They can potentially add additional costs for businesses where their vehicles don’t currently meet requirements. The good news is help is available, and transitioning to greener technologies can be better for the environment and save businesses money in the long run.” 


How to manage the impact of Clean Air Zones

Companies that are impacted by Clean Air Zones have a few options for managing the increased cost of doing business:

Working from home
Whilst this might not have a direct impact on your business costs, unless you pay for all your staff travel, it may benefit your staff to allow them to work from home so they can avoid driving into the Clean Air Zone.

Re-routing around the Clean Air Zone
If your business vehicles do not meet emissions standards and you regularly drive through a clean air charging zone, this could add significant costs, up to £100 a day for larger vehicles. You may decide that rather than driving through the zone, you will drive around it. You will of course need to offset the cost of additional fuel, wear and tear on vehicles and time to take an alternative route.

Financial support
The Government created a Clean Air Fund of £220m to help local authorities support individuals and businesses affected by Clean Air Zone schemes.

There are several Government incentives to encourage businesses to adopt green technology including upgrading your fleet to alternative fuel vehicles. Here are some of the grants and discounts your business can benefit from: 

Plug-in grants

  • A plug-in grant exists for commercial vehicles, giving 35% off the cost of a qualifying low emissions vehicle, up to a maximum of £2,500 for small vans and £5,000 for large vans.
  • For HGVs/LGVs, each year (1 April to 31 March) 250 grants are available for 20% of the purchase price of a qualifying small truck, up to a maximum of £16,000. Each business can apply for a maximum of 10 grants per year.
  • In addition, there are grants of up to £25,000 (maximum of 5 per business) for 20% off the purchase price of a large truck. 

Capital Allowances

  • You can claim 100% on first year allowances in addition to the annual investment allowance, as long as you do not claim both for the same expenditure.
  • You can also claim enhanced capital allowances for: electric cars and cars with zero CO2  emissions; plant and machinery or gas refuelling stations; zero emission good vehicles; gas, biogas and hydrogen refuelling equipment; equipment for electric vehicle charging points; and plant and machinery for use in a freeport tax site. 

EV infrastructure grant

  • Up to £15,000 per grant, covering up to 75% of the total cost of the work, with a maximum of five grants per business for the installation of electric vehicle charging points on your business premises. Businesses must install EV charging for a minimum of five parking spaces.
  • There is a separate and different grant called the Workplace Charging Scheme, which does not help towards the cost of charge point infrastructure. Both grants may be used for the same site, but not the same charge points.

Workplace Charging Scheme

  • If you choose to install one or more electric vehicle charging points on your company premises, you can claim an OZEV grant of 75% of the installation cost, to a maximum of £350 per socket for up to 40 sockets across all sites.

How Lloyds Bank supports businesses for a more sustainable future

Lloyds Bank recognises the challenging financial environment that many businesses are facing and is committed to providing support for companies looking to improve their green credentials. Upgrading your fleet is a substantial investment and, whilst Government grants provide a great incentive and discount, your business may find it requires additional finance to make the transition to electric vehicles. The following funding options are available:

Asset Finance

Lloyds Bank Asset Finance provides a range of hire purchase and finance lease solutions, including EVs and biogas vehicles, to new and existing business customers with a turnover in excess of £100,000 per annum. This allows businesses to spread the cost of the asset over time (12 to 60 months) with the option to own the asset at the end of the term. Funding starts at £15,000 with a minimum deposit of 10%.

Businesses seeking green investments and infrastructure projects may be able to utilise the Lloyds Bank Clean Growth Finance initiative, which offers businesses discounted funding, up to 0.25% or 0% arrangement fees, where certain sustainability criteria are met.


Other support

As well as providing funding, we also offer practical support through our Accredited (CISL) Relationship Managers to help your business transition to Net Zero, whether that is increasing the sustainability of your supply chain or managing changes to your company culture to champion green initiatives.

Creating a sustainable future is a top priority for us all, and we understand the transition to be sustainable is not always easy. Support is available to make the transition faster and more cost efficient for all businesses, big or small, so why not visit our sustainability hub to get started today and find out how we can help you on your journey to carbon neutrality.

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