Industry reacts to the Spring Budget 2023

Beatrice Barleon, Head of Policy & Public Affairs at EngineeringUK, commented: “We welcome the Government’s ongoing commitment to make the UK a science and technology superpower and the ambitions of growing the economy, meeting our Net Zero targets, and unlocking the potential of every region.  We also welcome the acknowledgement that to achieve this, businesses, including engineering and technology businesses, urgently need a larger skills and workforce base, now and in the future.”

“However, the measures on childcare as well as the focus on those over 50 will not, on their own, solve the wider skills and workforce shortages in the engineering and technology sector in the long-term. We urgently need greater investment in and focus on STEM education, STEM teachers, careers provision and vocational pathways for young people.”

“Our Fit for the Future Inquiry into engineering and technology apprenticeships will be reporting later this year and we hope to work closely with the Treasury to explore how they can support growth across the engineering profession.” 

Stephen Phipson, Chief Executive of Make UK, said: “Given the limited headroom the Chancellor had, his pursuit of continued stability and reassurance is understandable. Within this he was right to focus on significant measures to boost investment and the welcome support for childcare. Companies will be disappointed, however, that there is no extension of support for energy with the rapidly approaching cliff edge of the current scheme ending, while the planned changes to R&D tax credits remain and will be unwelcome for SMEs in particular as they are implemented in April.

“Looking forward, given the bigger picture at play and, in the face of the firepower that the US and EU are bringing to bear with their huge incentive programmes to bolster onshore manufacturing, the UK needs transformational reforms that look to the long term, with the aim of equipping businesses and individuals for the scale and pace of the challenge we are facing.”

“This can only be done through building on the Chancellors’ five key areas of growth with a radical, ambitious modern industrial strategy and policy agenda that has science, technology and innovation at its heart. Industry will welcome his reference to ‘Industrial Strategy’ and stands ready to work with and, support him, to reshape our economy and boost growth.”

On Full Expensing, James Brougham, Senior Economist said:

“Industry will welcome this boost to investment which is key to unlocking improved productivity for both the sector and the wider economy. Nevertheless, investment intentions have been dwindling over the past year as businesses have been forced to take a shorter-term view with their capital in the face of an onslaught of costs, despite thee significantly more generous, super-deduction scheme.

“To see the Government’s ambitions of growing investment, the focus must now be placed on removing wider challenges so industry is afforded the privilege of taking a longer-term view to investment. While the implementation of this new policy for three years compared to the two of the super-deduction allows more time for considered investment planning, a longer or permanent implementation would better fit the longer investment cycles of the sector. Concerns also remain for those smaller businesses with less access to capital, as it is those companies who are more likely to lease or buy second-hand plant & machinery, of which both methods of capital investment are excluded from the announced scheme’s benefit.”

Commenting on R&D changes, Verity Davidge, Director of Policy, said:

“While the Chancellor set out big and ambitious plans for AI and quantum, the focus on diffusion and adoption of digital adoption overall is lacking. R&D tax credit policy keeps chopping and changing and many businesses will struggle to keep up. Large swathes of small and medium sized manufacturers will find themselves out of pocket when the new changes come in in April this year and we were looking to the Chancellor to delay, or even better, reverse these changes to boost R&D across all of manufacturing.”

Commenting on Energy Security and Costs, Brigitte Amoruso, Energy & Climate Change Adviser, said:

“The Chancellor’s focus on energy security with the extension of Climate Change Agreements, and prioritising of nuclear and SMRs is welcome. However, this does little to tackle the real and immediate threat manufacturers face with rocketing energy bills. While the current energy support scheme has reduced bills overall, the incoming scheme is unlikely to be triggered, leaving many companies on a cliff edge at the end of the month. We now need to see further action from Government to turbo-charge industrial energy efficiency with competitive tax incentives and reliefs to invest in green technologies.”

On Labour Market Changes, Jamie Cater, Senior Employment Policy Manager, said:

“There is much which will begin to address the current labour challenge in manufacturing, but there remains much more to do. While manufacturers will benefit from improved skills training options for people who have become economically inactive, government support for upskilling and retraining remains piecemeal, and take-up of existing pathways is still low. It is important that government works with industry to make sure that workers of all ages can access the training they need, and that employers and employees alike have a clear understanding of what is available to them.

“Manufacturers will also welcome the Chancellor’s support for improving the accessibility and affordability of childcare. As they continue to make strides in becoming more inclusive employers, and seek to enable more parents, grandparents and others with caring responsibilities to come back to work, this additional support from government is a step in the right direction.”

Mike Hawes, SMMT Chief Executive, said:

“We face fierce international competition so it was pleasing to hear the Chancellor directly reference industrial strategy and measures to attract investment. Tax breaks for capital expenditure, which the industry has long called for, extensions to climate change agreements plus action to alleviate the high cost of living and encourage more people into work are all much-needed. Investment zones which focus on advanced manufacturing, of which automotive is an exemplar, R&D and technology are also positive steps.

“There is little, however, that enables the UK to compete with the massive packages of support to power a green transition that are available elsewhere. Indeed, the announced fuel duty freeze contrasts with an absence of measures to boost uptake of zero emission vehicles, such as reducing VAT on public charging. We, therefore, look forward to additional policy announcements that support advanced manufacturing sectors, as the right conditions will enable the investment that drives growth across the country.”

Kevin Craven, ADS Chief Executive, said: “ADS welcomes the Chancellor’s drive towards a much needed and timely industrial strategy for the UK, aimed at delivering sustainable growth, whilst supporting business investment. 

“Full expensing for three years is welcomed, and we will look for this to be extended at the next Spending Review.  We also welcome the increased support for SMEs undertaking vital R&D and are keen to see the outputs of the Treasury’s review on a single scheme, which must provide comprehensive support for businesses of all sizes to ensure the UK remains an attractive place for investment. 

“The announcement of Returnerships should help fill current vacancies and support our specialised engineering workforce while preparing for the jobs of the future. Additional flexibility around the Apprenticeship Levy is required to provide greater opportunities for addressing our workforce shortages.  

“Finally, industry looks forward to understanding the impact of additional defence spending plans and further attention on future energy support for businesses is needed. ADS continues to represent our sectors’ needs to Government.”

Shevaun Haviland, Director General of the British Chambers of Commerce, said: 

“The Chancellor has acted to address the unfilled jobs blighting our economy. It is especially good to see the help on childcare and for over 50s workers.  

“The plans for full capital expensing are also a step in a right direction to offset the rise in corporation tax. But as the OBR highlight a high level of uncertainty, the jury is out on how much it will help compared to the Super Deduction scheme. 

“The most recent BCC survey on investment found that only a fifth of firms were increasing investment and a similar number were reducing it. This budget looks unlikely to change that dynamic. 

“This is especially true for almost half of businesses who told us they will struggle to pay their energy bills from April. 

“They cannot invest when they are fighting to survive. Beyond the £63m of additional support targeted for leisure centres, there is little that will provide comfort to these firms.  

“The Government also failed to reform business rates which we have repeatedly called for. If the UK’s innovative growth industries are to remain competitive on the world stage, then Government must shift the dial further on investment, both within the UK and from overseas.” 

Mark Minihane, Advanced Manufacturing and Mobility Tax Leader at EY in the UK, reflects on the implications for the Advanced Manufacturing sector:

“The Chancellor’s focus on tax reliefs – and allowing full expensing for qualifying plant and machinery from 1 April 2023 until 31 March 2026 – is encouraging for the manufacturing sector.

“An increased rate of relief for loss-making R&D-intensive SMEs should also have a positive impact on manufacturing research and development.

“Given the importance of the advanced manufacturing sector to the UK’s regions, the announcement of support for 12 high-potential, knowledge-intensive growth clusters, known as ‘investment zones’, will also be welcome and could help to attract new opportunities for the UK’s manufacturing firms. These businesses will be keen to hear more about the enhanced rates of Capital Allowance, Structures and Buildings Allowance, and relief from Stamp Duty Land Tax, Business Rates and Employer National Insurance Contributions being offered.

“However, a more thorough and long-term package of tax reliefs to support UK manufacturing is required to accelerate growth in the sector. Manufacturing businesses will look to future policy announcements expected from the Government, and the devil will be in the detail when assessing the impact of this announcement on the sector.”

Professor Karen Turner, Director of the University of Strathclyde’s Centre for Energy Policy, said: “Perhaps the most important – and socially progressive – measure announced was ending the charging of higher electricity and gas rates to those on prepayment meters. This brings the rates payable by what are generally lower income and more vulnerable households in line with what most pay via direct debit.

“Combined with other targeted cost-of-living payments, this is a crucial step in reducing the regressive impacts of current energy price and inflation pressures. In terms of more transitory and more broadly focussed measures, the freezing of the cap on rates faced by all households under the Energy Price Guarantee to the end of June is also welcome, and, combined with the further freezing of fuel duty to March 24, will provide crucial help with current cost-of-living pressures.

“However, beyond the continued fuel duty freeze, this Budget doesn’t offer additional short-term relief for businesses, which is already reducing through the pre-announced replacement of the effective cap through the Energy Bills Relief Scheme with the Energy Bills Discount Scheme, which will run from 1 April 2023 to 31 March 2024. Crucially, it is what persistently high energy prices do to the prices of all the contents of consumers’ ‘basket of goods’ that are slowing the reduction of inflation this year, alongside continued risk that businesses will fold, putting jobs and the real incomes of many households at risk.

“Of course, the, (also previously announced, new British Industry Supercharger scheme will be important going forward, in attempting to ensure that more energy- and export-intensive industries remain internationally competitive. However, delivery mechanisms and timelines for implementation of the British Industry Supercharger scheme are yet to be finalised, support will not begin until spring 2024, and it is, of course, only aimed at a subset of firms across the UK.

“Nonetheless, such actions are important foundations for delivering sustainable ‘green growth’, as is securing a stronger domestic energy supply. Here, the reclassification of nuclear to enable similar incentives for investment as available for renewables, and the introduction of a competition for small modular reactor projects, are important new announcements. However, this Budget – where the Chancellor stated the main focus is growth – had limited focus on exploiting green growth opportunities.

“Here, there have been calls from UK businesses for UK Government to go further in support to business around incentivising green technologies and industries, particularly in the face of the US Inflation Reduction Action, which commits nearly $400bn of spending on climate and energy and could draw activity away from the UK. 

“The Budget does go some way to addressing this challenge through announcements such as the creation of 12 investment zones, tax relief for businesses on energy efficiency measures through the Climate Change Agreement scheme, and £20bn investment in carbon capture technology to reduce emissions, which our own research has demonstrated could bring real economic benefits to the UK.

“Yet questions remain as to whether this will be enough, with key decisions on the development and deployment of potentially important solutions such as hydrogen and the associated infrastructure requirements outstanding. As highlighted in the Skidmore Review, concrete detail and strategic thinking is required from Government to enable businesses to plan with greater certainty around the transition to Net Zero.  This is in order for businesses to capitalise on the opportunities available in an increasingly competitive global ‘race to green’ and contribute to what the Chancellor called ‘prosperity with purpose’ for the UK.

“A significant number of households and businesses continue to struggle with energy bills. Thus, further measures to alleviate those pressures are welcome, particularly the announcement on ending the charging of premium rates to those on pre-payment meters, which is a long overdue socially progressive change to energy pricing in the UK.

“However, the impact on continued cost-of living pressures this year will be limited by reduced support for the business that supply the wider set of goods and households that make up the ‘consumption baskets’ of all households, particularly those on lower incomes, whose baskets are heavily weighted towards things like food, which use a lot of energy in their production.

“Looking forward, while important announcements were made on delivering a cleaner and more secure domestic energy supply through new initiatives and support for nuclear and carbon capture and storage, it would also appear that Government has not yet fully grasped crucial and timely chances to take advantage of the opportunities, as well as mitigate the risks, of transitioning to Net Zero in an increasingly competitive global environment.”

British Ceramic Confederation Chief Executive, Rob Flello, said: “As an industry that is facing staffing shortages and skills challenges, the Chancellor’s move to encourage more people back into the workplace, especially the ‘returnerships’ for the over-55s, is to be welcomed.

“UK ceramics manufacturing is a forward-thinking progressive industry that can offer people a career, not just a job. It is an industry that offers the chance to improve skills continually and encourages personal growth. We hope UK manufacturing will figure strongly in these new initiatives.

“We also note the timely introduction of full capital expensing. The finer detail needs to be examined on what the qualifying plant and machinery is, but UK ceramics is an industry that is focused on decarbonisation, with companies already investing £600m of their own money into decarbonisation projects over the past 10 years. Therefore, any support on further investment is to be welcomed, as is the extension of the Climate Change Agreement for two years.

“Electricity could be a route to decarbonisation for some ceramic manufacturers, therefore the announcement of Great British Nuclear sounds promising. However, all evidence shows that the national grid cannot cope with the additional demands that will be placed upon it.

“Funding for deployment of Carbon Capture Usage and Storage (CCUS) is good but the Government needs to look closely at UK ceramics manufacturers that are not in the CCUS clusters, which includes the vast majority of our members.

“We strongly believe that an open-access funding programme that proactively works with manufacturers and suppliers, particularly SMEs, is needed – one which is focused on ‘dispersed’ sites that are unable to access decarbonisation support that is targeted at industrial clusters.

“It is time the Government recognises that the essential contribution UK ceramics makes to decarbonisation goes beyond the sector’s own net zero transition.

“Without ceramics, the production of renewable energy is hampered as, without refractories, there is no steel for wind turbines and no glass for photovoltaic panels. Ceramics are needed for electric vehicle batteries. Without high temperature industrial processes, there are no durable homes or commercial properties. There is no heat from waste without advanced ceramics.

“UK ceramics is critical to UK manufacturing, construction, and net zero and Government needs to provide more targeted support.”

ECA Director of Legal and Business Rob Driscoll said: “SMEs are a vital part of the construction sector, which itself is the backbone of the British economy.

“Today’s corporation tax hikes come at a time when SMEs have dealt with Covid, hyperinflating labour, materials and energy costs, rising insolvencies, receding demand and increased borrowing costs.

“Today’s budget may prove to be counter-intuitive and hinder businesses’ ability to pivot into delivering our urgent Net Zero targets.

“The drive to Net Zero hinges on skilled engineering services professionals doing the frontline work to upgrade our grid, electrify transport and heating, and connect our homes and businesses to clean energy sources.”

ECA Director of Workforce and Public Affairs said: “The measures announced by the Chancellor to encourage people back to work fail to address sector-specific labour and skills shortages. The extended energy bill support will provide some peace of mind, but this will be short-lived.

“To make the UK energy independent, a skilled, competent workforce is vital to maintain existing electrical Infrastructure. As the electrification of the UK accelerates rapidly, our sector needs stronger engagement from Government to develop a flexible and competent electrical workforce in sufficient numbers to meet growing demand and ultimately help deliver Net Zero on time.”

Phil Alston, Commercial Director of iconsys: “The new full capital expense deduction is a welcome addition to soften the blow of losing the capital allowance super deduction that expires at the end of this month.

Whilst not as generous as the existing scheme, this will allow UK manufacturing businesses to continue to invest in automating their processes and help with the push towards net zero.”

2. Creating 12 new ‘investment zones’ in ‘under-performing’ areas of the UK to boost high growth industries

“For manufacturing businesses looking to expand in the next few years, these new ‘investment zones’ could allow for quicker business development with cleaner, more streamlined process lines and full vertical data integration thanks to the ongoing automation and robotics revolution.”

Milissa Chesters, Head of People & Culture, iconsys:

3. Returning employees and retraining funding, increased pension allowance cap (from 40 to 60k pa) & lifetime pension upper limit abolished to encourage more mature ‘return to work’ employees and discourage early retirement.

“Any incentives to get skilled engineers and project managers back into the engineering sector are warmly welcomed by iconsys.

We’ve seen the decline in highly skilled engineers in recent years throughout manufacturing, and, whilst we only hire the very highest calibre, a larger pool of talent to draw from can only be of benefit to all.

Automation and robotics is often viewed as ‘replacing’ staff, but in our experience we find it frees up skilled labour to perform higher skilled tasks – those skill sets will remain invaluable.

In addition, changes to the childcare system and free childcare for children over 9 months will hopefully encourage more engineers back into employment after having children. Here at iconsys we encourage diversity in our workforce, and this can only help.”

Keith O’Connor, Founder and CEO of Fleetsolve, said: “It’s critical that the Chancellor implements a series of measures that will enable and support UK business throughout their energy transition on the journey to net-zero. We are pleased to see the Spring Budget announcement of energy efficiency funding for swimming pools. This will provide a much needed shot in the arm to those community facilities particularly threatened by high energy costs. CHP is a tried and tested technology that generates lower-cost electricity and heat simultaneously in one highly efficient process. As such it is ideal for energy intensive environments like swimming pools that require a lot of heat. We are poised to help local authorities and leisure providers take advantage of this funding as soon as it becomes available.

“We also welcome confirmation that the Climate Change Agreement (CCA) scheme will be extended for a further two years, and opened to new applicants. This, combined with the extension of the 50% First Year Allowance will free up some budget to invest in energy efficiency measures such as CHP, increasing resilience and allowing firms to operate more sustainably.

“As a proud Wirral business, we are also pleased to see the announcement of 12 Investment Zones, one of which will be in the Liverpool City Region. We know first-hand that our vibrant region has huge potential for further growth, and we welcome funding that will catalyse this.”

Paul Falvey, BDO tax partner, said: “Although the Chancellor has not published a roadmap for corporation tax reform, we are now beginning to see the outline of the UK’s longer term approach to business tax policy. This combines higher headline rates with more generous tax reliefs.

“Encouragingly, there seems to be a convergence of views between the political parties on this future direction which should provide some consistency and make it easier for businesses to plan for the longer term.

“Business groups have been lobbying for some time in favour of a full expensing capital allowance regime, so many businesses will warmly welcome today’s announcement.

“The additional reliefs available through the R&D scheme will also be a boost to a relatively small number of R&D intensive SMEs such as life sciences companies and high-level software businesses. However, we still need to see a clearer blueprint for the future of the R&D regime which is so critical to the UK’s attractiveness as a place to invest.

“Businesses will also be very supportive of proposals to increase free childcare which will help with recruitment and the retention of talent, and should, in the medium term, provide a real boost to the economy.

“However, very few of today’s announcements – barring perhaps the delay to the implementation of overseas R&D expenditure restrictions – will have an immediate effect, so it may take some time before we see any positive economic impact.”

Beatrice Barleon, Head of Policy & Public Affairs at EngineeringUK, said: “We welcome the Government’s ongoing commitment to make the UK a science and technology superpower and the ambitions of growing the economy, meeting our Net Zero targets, and unlocking the potential of every region.  We also welcome the acknowledgement that to achieve this, businesses, including engineering and technology businesses, urgently need a larger skills and workforce base, now and in the future.”

“However, the measures on childcare as well as the focus on those over 50 will not, on their own, solve the wider skills and workforce shortages in the engineering and technology sector in the long-term. We urgently need greater investment in and focus on STEM education, STEM teachers, careers provision and vocational pathways for young people.”

“Our Fit for the Future Inquiry into engineering and technology apprenticeships will be reporting later this year and we hope to work closely with the Treasury to explore how they can support growth across the engineering profession.”

Akin Gump partner, Matt Hardwick, commented: “Given the fundamental importance of the industry sector, it was surprising to see no pledge from the Chancellor to support the build out of battery manufacturing capacity in the UK. Without a clear strategy to build out electronic vehicle (EV) and energy storage battery manufacturing capacity, the UK risks its supply requirements being exported and with it the associated value, jobs and skills creation opportunity. In the context of EV batteries, it is also likely to herald the export of a significant part of our EV manufacturing capacity, given the desire by EV manufacturers to co-locate or integrate these two aspects of the EV value chain. We have to hope that the Government has left something in the tank, so to speak, and that we will see announcements for support in this critical area in weeks to come. “

Alan Thompson, Head of Government Affairs, Skyrora: “The Chancellor’s Spring Budget Statement shows that he and the Government have heard and are committed and aligned to industry’s feedback for relevant measures to enable the UK to become a Science and Technology Superpower, and this is highlighted in key aspects of today’s Budget statement.

“Until today, it was a commonly held sentiment within the UK space sector that while the Government was beginning to understand the compelling reasons for investing in space capabilities, the Treasury had often turned a blind eye. In spite of the financial challenges facing the IT and technology sector, the Chancellor has given hope to small engineering SMEs who have big aspirations for UK space. The announced measures are a reflection of the need to support companies, like Skyrora, that continue to invest heavily in R&D. As such, the Chancellor highlighted R&D tax credits, and as one of the priority focuses, we will be able to focus on manufacturing. Today’s Budget clearly places the significance and opportunity of space within the UK’s ambitions to be a global science and tech superpower. It’s for this reason that Skyrora would recommend the entire British launch industry comes together to take advantage of this unique set of circumstances and focus on delivering regular commercial launches from the UK. This alone can more than deliver on most of the Government’s targets in the areas of levelling up and providing a resilient and highly skilled engineering workforce for the challenges of next space and tomorrow.”

John Pearce, CEO, Made In Britain, said: “For the manufacturing community, the Spring budget provides several initiatives that sound very helpful on their own, but the real impact will depend on whether the combination of all the new measures can stimulate the right kind of growth, so badly needed across the whole economy.

“Offsetting investment in new equipment and machinery against their taxable profits, though good news broadly for machinery dependant makers, could have also included re-purposed (second hand) equipment to incentive longevity and circularity in the economy too. The childcare support for parents of 1-2 year-olds and the initiatives for over 50s are positive steps to bring people back into the workforce, but may take time to impact labour shortages. Support for STEM training and upskilling – crucial for driving the continued growth of British manufacturing – was sorely lacking, as was any clear plan to help high energy-using businesses this year and with their planning for next year.”

Mark Yeeles, VP Industrial Automation UK & Ireland, Schneider Electric said: “The Chancellor’s spring budget presents a mixed bag for UK industry. While the full expensing measures are a good step towards encouraging the investment that is vital for our sector to become more efficient and productive, the imminent end to energy cost support presents an existential threat to many businesses in our sector and the reduction of R&D tax credits will dampen innovation.

“There is cause for cautious optimism in the Chancellor’s reference to “industrial strategy” but there is little evidence yet of a sustained, strategic approach to incentivise the digital transformation of UK industry that is required.

“While measures such as the new AI sandbox, and support for the carbon capture industry shows support for sectors with big growth potential, this budget is another lost opportunity to offer UK industrial enterprises the breadth and depth of strategic support required for the transformational change needed to reverse flagging productivity and unleash the UK’s undoubted potential to compete on the world stage. Set against the huge support packages announced recently by the EU and the US and without further measures in the near-term, UK industry as a whole may fall further behind.

“More positive are the measures to improve the provision of accessible and affordable childcare and retraining, which are both important steps in the right direction for the skills and equality challenges faced by UK industry and as such are very welcome. It is essential that we strive for an inclusive work environment which enables those with childcare responsibilities to remain in or re-enter the workforce, and imperative that we enable the upskilling of the workforce to meet the needs of the workplace of today and into the future.”