Derrick Potter

The British government has added to the third-party logistics (3PL) sector's problems, Derrick Potter told the United Kingdom Warehousing Association (UKWA) members at its AGM.

Potter, the national chairman of UKWA, said the government's moves to scrap rate relief on empty industrial property and phase out the industrial buildings allowance (IBA) will damage the 3PL sector.

This is compounded by the rising price of fuel and the current world economic situation, Potter added.

"The Empty Property Rate Rules which came into effect on 1 April 2008 changed the tax position of empty warehouses substantially," he explained.

Empty warehouses are now liable after six months for empty property rates at the same rate as occupied warehouses.

"Ministers justified this new tax on the grounds that these reforms will provide an incentive for owners to re-use, relet or redevelop their empty properties and will increase the supply of commercial property available, thereby helping to reduce rent levels," Potter said.

He explained that the potential rate bills could reach a quarter of a million pounds a year for a typical empty 10,000m² warehouse.

"Now if a third-party warehousing company loses a client, it not only has to contend with lost revenue but also ... an additional tax burden - a double whammy."

Potter also criticised the government's decision to remove the IBA.

"Up until (April 2008), anyone building an industrial building like a warehouse could get an allowance of 4% on the cost of construction.

"The allowance is being ratcheted down by 1% a year over the next four years.

"With the global economic situation and the high price of fuel, these are difficult times for our industry. The government has only added to our problems ...," he said.

Derek Potter is in his second year as UKWA national chairman. He is the founder and executive chairman of The Potter Group, a logistics services and solutions provider. Potter is also a director of the Rail Freight Association, a chartered fellow of the Chartered Institute of Logistics and Transport, an honorary fellow of the Institute of Transport Administration and a member of the advisory forum of the University of Hull Logistics Institute.