Q&A with Steve Rodell and Gordon Balmer, Executive Director - Petrol Retailer’s Association

This is a transcript of the interview, which ties in with Business Outlook 2025 report. 

Steve: Hello, everyone. I'm Steve Rodell, Managing Director of Retail & Leisure at Christie & Co, and today I'm delighted to welcome Gordon Balmer, the Executive Director of the Petrol Retailers’ Association, or the PRA, to discuss the outlook for forecourts in 2025. Thanks ever so much for joining me today, Gordon.  

Gordon: You're welcome, Steve, and nice to be here.  

Steve: So, for the benefit of anyone who doesn't know what the PRA does or doesn't know Gordon Balmer, can you just provide us with a brief introduction? 

Gordon: Well, we're a not-for-profit trade association, been around over 100 years, and we represent the interests of our members, which include most of the independently owned forecourts, three out of the four major supermarkets and 75% of the motorway service areas. Just to put it into context, that's over half the number of forecourts in the UK and 65% by fuel sales in terms of market share. So, a substantial chunk of the industry.  

Steve: We recently launched our Business Outlook publication, which revealed a very strong demand for petrol filling stations across the country last year, and that is continuing into this (year). There are consistently more buyers for petrol filling stations than we can get instructions on - why do you think that is?  

Gordon: Well, I think when you actually look at where the money is in forecourts, a lot of it is in convenience retail, and there are a lot of entrepreneurs out there that are looking to buy that. I think when you look at some of the market information, the market share or the growth, on convenience retail in forecourt settings has actually outperformed convenience stores themselves.  

So, they're very attractive areas to invest in and, of course, you've got the other aspects such as EV charging, car washing and all the other services as well - it's not just all about fuel. 

KEY ISSUES AND TRENDS 

Steve: I suppose with it being a fairly needs-driven business, it's no surprise that there's been a lot of press around the price of fuels at the pump and on the poll. Alongside dealing with that media, what are the key issues and trends that you're dealing with for members at the moment?  

Gordon: The three areas that are really piquing their interest are crime and the unprecedented levels of crime, both shop and fuel theft. The rising costs - obviously, we've had the announcement on National Insurance and also the National Living Wage going up, so the cost of employing people has gone up. The other aspect is, obviously, government intervention with the current proposals around the Fuel Finder scheme and the market monitor from the Competition and Markets Authority. 

Steve: There are some pretty big challenges there, aren't there? And I suppose, actually, sustainability is now a golden thread through pretty much every business. How do you think the drive towards a more sustainable future and net-zero emissions is going to affect the sector over the next few years?  

Gordon: Retailers are obviously playing their part in terms of installing charging points. A forecourt is the safest way of getting a vehicle off the road and back onto the road. Many retailers are investing in facilities such as cafes, so with increased dwell time on forecourts, they can provide facilities for people to wait while their vehicles are charged. But we're also doing a lot of work in terms of sustainable fuels, such as HVO or hydro-treated vegetable oil, which can be a drop in fuel for lorries and trucks that were using diesel, so there's a lot of work going into that.  

Then obviously, you've got things like hydrogen as well. And as far as initiatives that our members are taking in terms of sustainable energy of their operations, a lot of them are looking at solar panels to try and cut electricity costs. They're looking at monitoring systems in terms of optimising the amount of electricity that they use on site, recycling waste and a number of other initiatives around really running the business as efficiently as they can. 

ALTERNATIVE FUELS 

Steve: There's a really interesting mix of things that you've just said there, and one of those is alternative fuels. It seems to me that the take-up of electric vehicles has recently faltered. The number of vehicle sales absolutely seems to have gone down a little bit. But there seems to be an emphasis from consumers on preferring hybrids as opposed to EVs. What is the reason for that, do you think? And how might this have a negative or positive impact on forecourts? 

Gordon: I think there's a lot of issues around range anxiety and the level of charging points, especially around other parts of the country other than in the South East - when you look at the network there are I think 70,000 charging points around the UK, but there is a balance in terms of different regions. 

So, the South East has got a lot, and when you go to places like the North West or the North East, it's fairly patchy. There is an issue around range and range anxiety. I think the average consumer probably isn't ready to take the full step to go electric, and a lot of the electric vehicles are being purchased by leasing companies for company cars, for fleets to take advantage of the tax break. 

In terms of advantages for our members, yes, they can have charging points. A lot of those people have got hybrids with charge at home, but obviously they will still use primarily petrol and that's good news for our industry.  

Steve: And what do you make of the recent news of some of the oil majors that are going to rein back their renewable programs and focus on fossil fuels again? Is that something that indicates a change in direction for them?  

Gordon: Well, it's one of these things that, with oil companies being PLCs, these multinational companies have got shareholders to answer to. And those companies, especially during the Ukrainian war when energy prices spiked, made a fortune and some oil companies that pivoted towards their screen initiative didn't do as well, and so there's been some announcements that they're concentrating back on the oil and gas industry and leaving renewables to other companies. 

One of the problems here is renewables can be quite a long play in terms of investment, in terms of getting your money back. Certainly some of our members, particularly in the independent sector, are still sitting on the fence as far as EVs are concerned because some of the investment cases, especially when you put in the cost of putting power into a site, can be, eight or nine years in terms of getting a return on their investment. There are a lot of issues there that people have to consider. 

Steve: We recently sat on a panel together at the Forecourt Trader Summit, and there was a presentation from a government official talking about the amount of EV charging points around the road network, and he showed us a map where there were some ‘cold spots’, he called them. Do you think it's realistic that every forecourt operator could have an electric charging point on their forecourt?  

Gordon: No, because there are technical issues around the level of power that needs to be delivered, the upgrades to the network in terms from the local electricity company to provide that local authority planning permission. There are a lot of hurdles to be overcome. And also, the propensity for people to charge on that site - traffic levels, ownership of EVs in that particular location, whether it's an urban site or a rural site or transient site. So, there's a huge amount of things in the mix in order to determine whether that site has got the propensity to really put charging points in that would make money. 

Steve: And we know that there are some companies that have invested heavily into EV charging. For those that are lucky enough to be able to do that or that have got the infrastructure to be able to put charges on, do they make money?  

Gordon: They will make money, and some of the people that are actually doing it are the larger companies - the larger, independently owned forecourt groups, people that are backed by venture capital and the major multinational oil companies, they're the people that are doing that at the moment.

Steve: So it's not for everyone, then?

Gordon: Not necessarily, no.

FUEL FINDER SCHEME

Steve: A little earlier on in the conversation, you mentioned the Fuel Finder scheme. Tell us a little bit about that and what that is going to do for retailers. Or what will retailers need to do to accommodate it?

Gordon: Well, the genesis of this scheme came from the Competition and Markets Authority study back in 2022, and that was following the change, or structural changes, to the market and changes of ownership in some of the major supermarkets. 

The government started to notice that fuel margins had been increased when they compared them with an average of the last ten years, and they sought to understand what the underlying trends were. And then there was a fear that the market wasn't as competitive as it should be. So what the government have done is they proposed two actions from this report. 

The first is the Fuel Finder scheme issue, as you’ve talked about. The second one is a market monitor. The Fuel Finder scheme will require all forecourts in the UK to put in their price changes on the pole into a centrally controlled database. Now, what's going to happen there is app providers will then skim that data, and so the motorist in real time will be able to see what is on the pole at any particular forecourt, and it's as best as they possibly can. What they hope by doing that is people will then be able to shop around for the best deals and also it should increase competition amongst the forecourt operators. 

Steve: But do you think consumers are driven wholly by the price that's on the pole? So if they're looking at these apps and the cheapest fuel is over there, it might be ten miles away. Are they going to go there?

Gordon: Well, unless you're silly, because you've got to take into account the cost of the dead miles to travel to a site to get a couple of pence per litre off. And no, I still believe people are going to be looking for convenient sites - so sites near where they live or where they work, or on their transit route, and what the facilities are on site because, some companies will tell you that 50% of people that visit a forecourt don't come for fuel. They come for food for tonight or food on the go, to get their car washed, to drop a parcel off, or to go to the post office. So there's a whole range of services that they utilise, not just to get fuel. 

 OPERATIONAL CHALLENGES

Steve: Okay, so just turning back now to some of the operational challenges that you mentioned earlier on. Obviously, the rising amount of crime across retail generally, but particularly in the convenience and forecourt sector, is a big problem, and it's been well documented. How are retailers dealing with that? Because presumably, there's a huge cost there.

Gordon: There's two aspects to this. The government are going to make the offence of assaulting a shop worker a criminal offence, punishable by six months in prison or an unlimited fine, which is great news because shop workers need the protection of that legislation. The second aspect is the removal of the immunity or seeming immunity of any crimes below 200 pounds in terms of value. 

That should, hopefully, mean that police actually attend to some of these incidents. To put it into context, the retail business forum (British Retail Consortium) did some studies on the amount of shoplifting, and it cost the retail industry over 2 billion pounds a year, and that's 55,000 incidents of shoplifting per day. So, you can imagine, our retailers aren't immune from that. They are getting hit as much as C-stores as well.

And in terms of what they're actually doing on the ground, they're putting things in, such as facial recognition software. They're also looking at body cams and headsets and, in many cases, unfortunately, they're having to put in enhanced security, which means security guards on the door to ensure that what is taken is paid for. 

Steve: And, of course, going back to the sustainability point, and we're focusing on costs here, we've got the minimum energy efficiency standards. There's got to be more investment into LED lighting, better ventilation and air control, doors on fridges - things like that. What evidence do you see of retailers putting investment into those areas?

Gordon: Well, we have a number of roadshows and business breakouts throughout the country, and one of the speakers is from a company that does actually install chiller doors, and that's proving to be very popular. There's a substantial amount of money to actually be saved by putting doors on chiller cabinets. And also the other thing that a lot of people are looking at is software and sensors now, to determine what the peak times during the day are for electricity usage and then start switching things off. 

So motion sensor switches, turning lights off and being more careful about the amount of electricity used - there's a lot of work going into that.

Steve: So one of the good things about our industry is that we have a lot of independent retailers that come up with great ideas, and it seems to me that the government seems to want to thwart them at each turn. So there are obviously increasing restrictions and regulations on some of the products, such as tobacco, disposable vapes and unhealthy foods which are high in fat and high in sugar. Do you see any evidence of retailers changing what they do to combat those issues?

Gordon: Yes. I think a lot of retailers are now looking at putting healthier foods in place, so instead of this great big bank of chocolate when you walk out of the forecourt or where you go to pay, they're putting energy bars in, protein bars, things that are more healthy. And as far as vapes are concerned, obviously, we've got the ban on disposable vapes coming up, so a lot of retailers are now trying to up-sell refillable vapes - they are actually trying to take action to mitigate some of these things. 

COST PRESSURES

Steve: Just rewinding to the autumn budget for a moment; there's obviously a huge impact potentially on the level of wages payable in a petrol filling station environment. What are you seeing from your point of view and what can you do about that?

Gordon: The forecourt sector employs over 90,000 people. A lot of those people are close to or just above the national minimum wage, and the national minimum wage will go up for over 21-year-olds by around nearly 7%, and that is a trend we've seen since 2018.

So those costs have to be absorbed, and people have to be paid the appropriate rate for their role. The big impact is the National insurance threshold changes, and that is going to cause a lot of headaches for people. So, unfortunately, quite a number of our members are now looking at freezing recruitment. They're also looking at the manning levels that they actually need, and they're starting to try and automate some of the services. So, for example, self-scanning tills which will enable their teams to then help customers more and engage with the customers. So there are benefits there, but yes, there are a lot of challenges going on in that area.

Steve: When it comes to buying and selling a business, quite often, we come up against capital gains tax and inheritance tax. Is there anything in that subject matter that you can do anything about and lobby the government with?

Gordon: This is another big area. A lot of people, when they saw the changes to inheritance tax, thought it would only affect farmers, because they were the ones that are most vocal - up and down Whitehall with their tractors and the horns blaring, etc., etc. but it affects all family run businesses that have got business property because (with) the business property aspect the exemption has now been removed. 

From April 26th, inheritance tax will be levied on business property, so when you actually look at the demographic of the forecourt industry, 64% is independently owned, and a lot of those are family businesses, especially in rural areas that serve local communities. So there's a huge area of risk there.

We have lobbied the government, and we've joined together with Family Business UK, a trade association, with a number of other trade associations to write to the Prime Minister, pointing out the issues. Of course, the issues around the forecourt industry are fundamental because if we can't get fuel to certain areas and fuel deserts open up, then consumers will have to drive further afield, and of course, the price will go up. So there's another area of fuel resilience that is a big risk in this area. This is something we've put a lot of effort into to try and get the government to change their mind. 

Steve: If we just go back to the beginning of the story and why a lot of people come onto a forecourt and it's to refill their car with petrol or diesel, what’s happening to the volumes of fuel that are being sold throughout the UK at the minute? Is it going down? Is it flatlining? Is it going up?

Gordon: Well, before the pandemic, we had a measurement from the government, and what they do is they take the wet stock readings on a weekly basis. And when you actually looked at the reading that they had

Before the pandemic struck, which was in March 2020, and then you looked at it afterward, there was about a 10% reduction. However, since then, we’ve actually measured, for example, 2023 versus 2024, and it’s been relatively stable. We haven’t seen much of a reduction. We’ve seen a decrease in diesel, but that’s been matched by an increase in petrol. So, in many of the forecourts, so many of our members that I talk to are saying their volumes are actually doing very well at the moment

Steve: So quite sensibly, fuel is probably flatlining. In order to deal with all the costs that we've talked about here, is there any surprise that fuel prices have gone up at all?

Gordon: Not to me there isn't, but there is to some members of the government, unfortunately, and it's our job to explain how the economics of a forecourt actually work, and we are doing that.  I have a standing offer of a meeting every two months with the Competition and Markets Authority, where I'm meeting with our accountants and economists to take them through the complexities of how forecourts operate and what they need to take into account when they compile their analysis and produce their reports. 

FORECOURT OPPORTUNITIES

Steve: So going back to forecourt property, in which case for us, the sector remains a pretty solid investment opportunity, or so it seems, from the amount of buyer activity that we see at the moment. What do you see as important features of tomorrow's forecourt?

Gordon: Well, I think a lot of investors are looking for larger plots so they can develop the land and put different services on the land. We’ve got some great examples of members, putting self-service jet washes – a very good money spinner, hugely profitable - with an app that you can go into and pre-book when your slot is and pay for it over the app. So some really good examples of that.

Obviously EV charging will play a part as well. Again, if you've got a big enough site, you can put EV charging in place and then other facilities in store such as a café, fresh food, food on the go, and then you've got the micro businesses such as parcel collections, post offices. So a range of services around the forecourt and the forecourt being a hub, and being a destination that people actually want to go to in order to get what they need to get, rather than something that's almost like a distressed purchase where they go because they've got to get fuel. 

Steve: Do you see any parts for hydrogen to play in the future? I mean, if we look back at the last 15 years or so, we were probably talking about electric vehicles in the same way perhaps that hydrogen is being talked about today.

Gordon: Well, we learned at the recent event that we went to that there's only three hydrogen refuelling facilities in the UK, certainly on the road. However, some of the members are starting to embrace this, particularly for an HGV setting.

However, unfortunately, there are some challenges there because a hydrogen vehicle is substantially more expensive than a diesel-powered vehicle. That's why we're looking at things like HVO; hydrogen I think, will play its part, but the technology has got to develop. The costs have got to come down. And then obviously we've got to look at how we actually accommodate that in terms of fuelling on the road. 

 OUTLOOK FOR 2025

Steve: So going back to our Business Outlook document, we did survey stakeholders in the wider retail sector as part of that research, and 78% of respondents said that they're looking to either buy or sell over the next year or so. How does this resonate with PRA members? Is it a similar sort of trend that you've seen?

Gordon: It is, certainly amongst the mid-range groups, they're all looking for more sites. And we're seeing people every time we go to an event ask, “Do you know anyone that's up for sale?” and I'm sure when you come to our events, you get asked exactly the same questions.

We are also seeing at the bottom end of the smaller end, people coming up to retirement now, and their son or their daughter doesn't want to work in a forecourt, and so some of those businesses are now starting to be sold. Now you see some of the more single-site operators, more rural operators, starting to come on the market, and it's that area that, I think, has got more attrition rate.

Steve: So really, I suppose that brings us to the end of our wide-ranging discussion on the petrol filling station market. I just want to say thank you very much indeed, Gordon, for taking the time to come and talk to us. It's been a pleasure to go through those matters. And best of luck for 2025.

Gordon: Thank you very much, Steve. 

 

To watch the full video interview, visit: https://www.youtube.com/watch?v=p1dSoemlJEg