Chancellor Philip Hammond has delivered his second Budget Statement - here are the key points which are most relevant for manufacturing industries.
One of the government’s main Autumn Budget announcements is to expand the National Productivity Investment Fund (NPIF) to support innovation, upgrade the UK’s infrastructure and underpin the government’s modern Industrial Strategy.
Terry Scuoler, chief executive officer at EEF, said: “We are delighted to see the Government’s National Productivity Fund has been extended for a further year to £31bn to upgrade Britain’s economic infrastructure and the extension of the R&D tax credit increasing to 12% will boost business investment in future productivity and technological advances.”
However, the decision to further develop the NPIF has to be seen against the backdrop of the economic context the UK is currently determined by.
The economic context
Although the UK economy has shown its resilience, the Office for Budget Responsibility (OBR) expects to see a slower GDP growth over the forecast period.
The speech stated that the government expects the UK economy to grow only by 1.5% this year, whereas the estimated economic growth in March was still at 2%. It is as well expected that growth will drop to 1.3% by 2020 and then rise to 1.5% in 2021.
Philip Hammond said: “Regrettably our productivity performance continues to disappoint. Today the OBR revised down the outlook for productivity growth, business investment and GDP growth.”
However, the disappointed expectations regarding estimated economic growth seem to be at least a sufficient reason for the government to invest more into digital infrastructures.
Business and digital
Regarding the proceeding digitisation across business sectors, the government states support for 5G mobile networks, fibre broadband and AI.
The government will invest a further £160m from the NPIF in new 5G infrastructure. The first two projects are:
- £10m to create facilities where the security of 5G networks can be tested and proven, working with the National Cyber Security Centre
- £5m for an initial trial, starting in 2018, to test 5G applications and deployment on roads, including helping to test how we can maximise future productivity benefits from self-driving cars
The government seeks to provide £540m to support the growth of electric cars, including more charging points and another £2.3bn allocated for investment in research and development.
It is also said that digital economy royalties relating to UK sales which are paid to a low-tax jurisdiction will subject to income tax as part of tax avoidance clampdown, and this is expected to raise about £200m a year.
In terms of digital education, Hammond announced that 8,000 new computer science teachers will be recruited at cost of £84m and new National Centre for Computing is planned to be set up.
Tim Thomas, Director of Employment and Skills Policy at EEF said: “It is vital that our young people are taught by world class teachers if the UK is to compete on the global stage, particularly as 52% of school leavers in England currently don’t have a good GCSE pass in maths. “
Infrastructure, transport, & regions
The Budget states the plan to invest £320m in former Redcar steelworks site and a further devolution of powers in Greater Manchester, and a £1.7bn city region transport fund is being set up, to be shared between six regions with elected mayors and other areas.
EEF Chief Economist Ms Lee Hopley said: “Today’s announcement of a new Transforming Cities Fund rubber stamps the argument manufacturers have consistently been making – that regional transport investment must be the priority focus of devolution to help increase the size of talent pools and provide wider access to skills.
“If we are to boost regional infrastructure investment in a systematic way we need to shift from decisions having to wait for an annual Budget statement in Westminster towards investment decisions being taken closer to those that will benefit.
“Ministers must provide Mayors with the fiscal tools, through the promised Mayoral infrastructure levy, to help them identify and prioritise their own investments coupled with a clear plan to rollout devolution to other parts of England currently without.”
The Budget provides as well £2bn for Scottish government, £1.2bn for Welsh government and £650m for Northern Ireland executive.