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TfL predicts that small hire-or-reward operators will be hardest hit by the cost of complying with the London LEZ. Transport for London (TfL) published its economic assessment of the impact that the London low-emission zone (LEZ) will have on the capital and on operators this week. The report focuses on the costs of compliance -which at first and even second glance seem substantial. The LEZ will heavily discourage any non-Euro-3 vehicle over 3.5 tonnes from entering the London region. Buses, coaches  and some lighter vehicles will face a £100 'charge' per day to bring non-compliant vehicles into the zone and commercial vehicles over 12 tonnes will face a £200 bill. Fines for non-payment of the charge and the use of dirty vehicles in the zone are swingeing - £1,000 for LGVs and £500 for lighter vehicles.

In 2008 all vehicles who wish to avoid these costs will have to be Euro-3 compliant in 2010 the weight range will drop to include vehicles from 1.2 tonnes from 2012 the required standard will increase to Euro-4. The report calculates the costs of this compliance at £300m-£470m - although a substantial proportion of this belongs to the bus and coach industry, which will find it easiest to pass these costs on to passengers. The report estimates that 61% of the relevant vehicle parc will already comply with Euro-3 and that the remainder will choose to deal with the problem by: building the charge into their expected business expense replacing their vehicles or retrofitting  particulate traps. These options are costed at £1,100-£4,200 for LGVs and £1,600-£1,900 per vehicle for light CVs.

While the average impact of the extra costs will be just 0.7% of annual operating costs, this is still highly detrimental to the hire-or-reward sector in which 3% profit margins are considered healthy. Particularly hard hit will be small hire-or-reward operators -the report suggests they will absorb 95% of the cost themselves, unlike the big fleets which will pass it straight on to their customers. Equally, large fleets will more likely choose a higher initial investment to ensure compliance than small operators who will tend to take the cheapest route in the short term, but end up paying more in the long run. The report also concludes that smaller operators, often with only one or two depots, will have less ability to route around the LEZ. The report makes the assumption that own-account operators will be able to pass their costs onto their client base, but some organisations disagree.

Robin Milton of the Horticultural Exhibitors Association says: "We're already suffering a downturn in trade and a shift in the way our market trades. This kind of extra cost is definitely not in the right direction." The LEZ, which is expected to cover every London borough inside the M25, will most severely affect the 4.6% of the UK LGV fleet that is based in London, as well as the 5.5% that operates from the surrounding counties. Given that smaller fleets will find the changes tougher, TfL is sanguine about the market shake-up the LEZ will precipitate. The report says: "Some smaller vehicle operators may find it hard to meet the costs needed to comply with the LEZ and may choose to exit the London market... However we can assume that virtually all the vehicles exiting the London market would be replaced by compliant vehicles owned by other transport providers... There may be a redistribution of work to businesses that are better placed to operate in London.

Contact: LEZ helpline, 08457 224577

www.tfl.gov.uk/tfl/low-emission-zone/

Among the many road transport operators dreading the economic impact of the LEZ are a number of own-account operators who fear the new charges will make London business unfeasible. The Horticultural Exhibitors Association has 250 members, all of whom run small nursery or horticultural businesses. Key events in their business calendar are the Hampton Court Show and the Chelsea Flower Show. Typically they run 7.5-tonne vehicles on restricted licences, and already incur heavy costs for the week, including £160 parking charges per vehicle.

Member Robin Milton, who also runs a transport operation out of Felixstowe docks, says that many members' nursery vehicles do not comply with Euro-3 - including his own. "That vehicle only does 10,000 miles a year. There's no reason to replace it. 7.5-tonners carry all you would expect to sell at a single show. I fear our members will face huge bills that they cannot afford to pay, either to comply or in charges." Milton underlines the danger of the LEZ to London business: "What will happen when the Chelsea Flower Show is cancelled because 250 exhibitors can't afford to attend?"