Manufacturers react to Government spending review

Posted on 25 Nov 2020 by Tom Lane

Today The Chancellor of the Exchequer, Rishi Sunak has announced a one-year spending review to help the UK respond to the ongoing Covid-19 crisis.

In order to prioritise the response to Covid-19, and our focus on supporting jobs, the Chancellor and the Prime Minister have decided to conduct a one-year Spending Review, setting department’s resource and capital budgets for 2021-22, and Devolved Administration’s block grants for the same period.

The government has put in place considerable support for businesses, families and the economy throughout the current crisis and will continue to show flexibility and creativity in our response.

The Spending Review will build on that support and focus on three areas:

  • providing departments with the certainty they need to tackle Covid-19 and deliver our Plan for Jobs to support employment
  • giving our vital public services enhanced support to continue to fight against the virus alongside delivering first class frontline services
  • investing in infrastructure to deliver our ambitious plans to unite and level up the country, drive our economic recovery and Build Back Better

The Chancellor of the Exchequer, Rishi Sunak, said: “In the current environment its essential that we provide certainty. So we’ll be doing that for departments and all of the nations of the United Kingdom by setting budgets for next year, with a total focus on tackling Covid and delivering our Plan for Jobs.”

He continued: “Long term investment in our country’s future is the right thing to do, especially in areas which are the cornerstone of our society like the NHS, schools and infrastructure. We’ll make sure these areas crucial to our economic recovery have their budgets set for further years so they can plan and help us Build Back Better.”

Further information

  • As outlined in July in the interest of fairness we must exercise restraint in future public sector pay awards, ensuring that across this year and the spending review period, public sector pay levels retain parity with the private sector.
  • Hospital building and HS2 are examples of the kind of capital projects which require multi-year capital allocations.


UK Manufacturing
Stephen Phipson, Chief Executive of Make UK.

Commenting on the statement by the Chancellor of the Exchequer, Stephen Phipson, Chief Executive of Make UK, said: “This was a realistic statement which lays bare the immense challenges the Chancellor and the economy faces in the near term. In the face of these it is absolutely right that the priority must be to protect jobs, whilst trying to create opportunities for young people whose futures have been left badly scarred. Equally, it is vital to put in place the foundations now for how we rebuild our economy.

“Industry will commend the Chancellor for addressing this difficult balancing act with a package of measures designed to get boots and shovels on the ground, especially the National Infrastructure Bank and Levelling up Fund to boost growth in those Regions which have been hardest hit.

“There remains a case, however, to also put in place consistent, longer-term sector specific support that mirrors our international competitors. Key strategic sectors, in particular aerospace and automotive, employ substantial numbers of high value, well paid jobs in areas of the country that are essential to the levelling up and re-balancing of our economy. They are advanced technology companies whose skills will be vital in developing the green and digital futures which will help solve many of the societal challenges we face. To ensure they are at the vanguard of this new economy, it’s vital their futures are secured with short term support now.”

Gareth Stace has been appointed Director of UK Steel

UK Steel Director General, Gareth Stace, said: “Today’s Spending Review announcement is to be cautiously welcomed, addressing as it does key high-level priorities of jobs, infrastructure, and innovation, but further steps are required. With COVID-19 still causing unprecedented damage to the UK economy, manufacturing, and steel demand, it is vital that the key measures set out today to aid recovery are translated in detailed, practical action on the ground, and are built upon in next year’s fiscal events.

On Infrastructure: “Most importantly, today’s long-awaited National Infrastructure Strategy, and the promise of £100bn spending next year, must be rolled out in a manner that ensures these projects maximise support for jobs and economic growth in the UK. Elsewhere in this review, the Chancellor has made it abundantly clear the urgent need to help people back into work through the Plan of Jobs and the Restart Scheme. However, the Government must also recognise and unleash the full potential of infrastructure projects to support British industry and its workers. The huge levels of promised infrastructure spending must now deliver the largest possible return for taxpayers’ money by maximising the UK content of these major projects, including UK-made steel. We call upon the Government to urgently work with the steel industry now to make this a reality, building UK infrastructure from UK steel.

On Energy and Climate Change: “Elsewhere, promised spending on decarbonisation has the potential to help the steel sector on its road to net-zero, but worryingly there is again no detail on measures to provide cost-competitive electricity prices for the sector that will fundamentally underpin this transition. Critically, the funding for carbon price compensation comes to an end this year, and without renewed funding, the sector will face additional costs of over £30m. Steel producers already face higher electricity prices, where their costs are almost £50m higher every year than their German counterparts. It is critical that the Government immediately confirms a budget for this essential scheme next year.

On Innovation: “We welcome the Chancellor’s announcement on a £15 billion investment in R&D next year. The future of the steel sector rests heavily on continued innovation of our products and processes, and today’s announcement has the potential to help us do just that. It is critical that the Government now moves swiftly to create a UK Research Fund for Steel – filling the gap left by our exit from the European scheme at the end of the year. Crucially, the money required to do this is already there, with £200 million in industrial levies paid by UK steel companies set to be returned to the UK by the EU next year.

Midlands Manufacturing Resilience Commission, M2R, Clive Hickman - MTC Workshop.
Clive Hickman, CEO of Manufacturing Technology Centre

Clive Hickman, CEO of Manufacturing Technology Centre comments: “In this extraordinarily difficult context, it is excellent news that apprentices will be able to use these skills wherever in sector supply chains they are needed. The reforms announced today are vital to increasing the productivity of the investment that’s also been brought forward by the public sector. With the right conditions this will be more than met by members like ours at the MTC in construction, manufacturing and technology. The Levelling Up Fund, Infrastructure Bank, Lifetime Skills guarantee and £1.8 billion for school buildings must work together to ensure building back better makes the UK more resilient, with better jobs available in more productive supply chains.”

John Rossiter, indirect tax director at MHA MacIntyre Hudson, said: “On infrastructure spending, the Spending Review struck a good balance between large long-term infrastructure projects and funding for smaller regional ‘shovel-ready’ projects.  Combined with the commitments made to upskill workers and create jobs, this should provide the foundations to help support the medium-term recovery from the Covid-19 crisis and longer-term ambitions. However, it’s vital that funding is made available quickly and efficiently, and that projects needing funding are identified and agreed in a timely fashion. Speed is of the essence if jobs in the construction sector are to be protected in the short term and increased in the longer term to meet infrastructure demand.

“The establishment of a National Infrastructure Bank allowing private investment is a very positive development announcement, and will help funding get to where it needs to be deployed. However, there absolutely needs to be regional capability to deliver projects. Not just local authorities or private business, but other stakeholders such as the local community, campaigners and advisers have got to be engaged. This model has been proven to work – and work effectively.”