UK Logistics Faces £10 Billion Fuel Gap as Grid Costs and Import Dependency Threaten Net Zero Deadline

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The UK’s multimodal freight sector is staring down a decade of disruption as it races to decarbonise water, air and rail operations against a backdrop of the highest industrial electricity prices in the G7, chronic grid connection delays and a domestic low-carbon fuel supply chain that has already shed industrial capacity. A major report published by Logistics UK warns that without a fundamental shift from modal silos to integrated system planning, the country risks missing both its carbon targets and a multi-billion-pound economic opportunity.

The trade association, which represents more than 22,000 members across road, rail, sea and air freight, says transport remains the UK’s largest domestic source of greenhouse gas emissions. Official government data shows domestic transport accounted for 31% of net UK emissions in 2025, with international aviation and shipping adding further pressure. The sector’s emissions actually rose 2% year-on-year, driven by increased petrol and diesel use in road transport.

The report, Thinking Holistically: How to Decarbonise Multimodal Logistics, identifies a critical vulnerability: the UK currently produces only 0.65% of global biofuels and imports approximately 70% of the liquid biofuels it consumes. Of the 3,700 million litres equivalent of renewable fuel supplied in 2023, just 9% came from UK-origin feedstocks. This import dependency leaves the sector exposed to volatile commodity markets and geopolitical shocks, as demonstrated by the 2022 energy crisis and 2026 Middle East conflict.

Heathrow Airport has already moved to secure supply, introducing a pioneering SAF incentive programme that halves the price gap between conventional jet fuel and sustainable aviation fuel. SAF made up 3.1% of all aviation fuel uplifted at Heathrow in 2025, meeting its 3% target. The airport has set an ambition to reach 11% SAF by 2030, well above the UK mandate of 10%. Yet global SAF capacity remains short of 2030 targets by almost 4 million tonnes, underscoring supply-security risks for operators dependent on overseas production.

While electrification offers a long-term pathway for ports, rail terminals and airport ground equipment, the business case is being eroded by structural cost disadvantages. The UK has the highest industrial electricity prices in the G7, with non-domestic users facing policy-related charges that can make electricity four to five times more expensive than gas.

Grid connection delays are compounding the problem. Distribution Network Operators are frequently unable to provide timely connections for logistics sites seeking high-power charging infrastructure. At DP World’s London Gateway, the world’s first all-electric container berth required £350 million in capital investment and was only made possible through a £1 billion site-wide programme. The port handled over 3 million TEU in 2025, but replication across the UK network is constrained by queue management bottlenecks and a lack of strategic grid planning.

Rail freight faces a parallel constraint. Only 10% of British freight trains are hauled by electric locomotives, and the proportion has been declining. The Chartered Institute of Logistics and Transport has identified that just 60 miles of targeted “in-fill” electrification on the busiest corridors would unlock disproportionate benefits, as the highest-volume freight routes account for just 2% of network distance yet carry 15% of all rail freight.

The report frames the next decade as a “decisive” period in which policy must treat logistics networks, energy systems and decarbonisation tools as parts of a single integrated whole. Logistics UK is calling for faster planning consents for fuel production and bunkering facilities, targeted tariff relief for operators investing in zero-emission infrastructure, and a coordinated national approach to allocating scarce low-carbon feedstocks across aviation, maritime and road transport.

The government has signalled intent. The Department for Transport’s Maritime Decarbonisation Strategy targets 30% emissions reduction by 2030 and 80% by 2040, while the UK Shipping Office for Reducing Emissions (UK SHORE) has allocated £240 million to over 200 projects, with a further £448 million announced in 2025. For aviation, the SAF Mandate began in January 2025 with a 2% blending requirement, rising to 22% by 2040.

But the report warns that without clarity on how low-carbon fuels will be allocated between competing modes, and without reform of industrial electricity pricing, the transition risks becoming a series of isolated pilot projects rather than a systemic shift. The question for operators, investors and regulators is whether the UK can build a fuel and power system that is available “in the right place at the right time” — or whether the gap between ambition and infrastructure will widen into a bottleneck.

_{Source: Logistics UK}