Manufacturing experts respond to the Autumn Budget 2022: A round-up
18 November 2022
What impact will UK Chancellor Jeremy Hunt’s newly announced Autumn Budget have on the manufacturing industry? Industry experts share their thoughts on how it will affect the energy crisis, the skills gap, EV adoption, business survival, and more.
The Government has announced that, from April 2023, energy bills will increase to an average of £3,000 a year, up from £2,500. This significant increase is set to drive an unprecedented number of UK households into fuel poverty.
Mike Foster, CEO of the Energy and Utilities Alliance (EUA), emphasised the devastating impact this will have on the British population, saying: “Our recent consumer survey found 78 percent of Brits support keeping the price cap on energy bills in place, so an increase that plunges millions into fuel poverty is not what any households wanted to see.
“This is particularly immoral while the Government’s own Boiler Upgrade Scheme, that is still in place, hands out £5,000 subsidies to the well-off to change their heating, while millions struggle to pay their bills.
“They have missed an open goal to solving some of the energy bills turmoil plaguing the British public. Redistributing these millions of pounds in pointless heat pump subsidies into insulation, efficiency measures, and bills support is really a no-brainer.”
The Autumn Statement also cemented industry’s belief in the need to turn to renewable energy: “With news of renewed investment in nuclear, this budget also reinforces our view that longer-term, we need to move away from fossil gas and switch our network over to hydrogen,” continued Foster.
“Not only will this help to reduce emissions – which the Chancellor pointed out was a priority in his speech – this level of energy independence would also free us from the global gas markets that Putin’s war has significantly impacted.”
Meanwhile, Stephen Phipson, Chief Executive of Make UK, emphasised the negative impact of high energy bills on the job market and UK’s global economic competitiveness: “Energy support for business has been very welcome and helped many firms survive,” he said.
“However, the apparent decision to end support next April when prices are likely to remain high for much longer is troubling. The certainty and lower costs enjoyed by our near neighbours [give] them a large competitive advantage which puts UK jobs at risk.
Phipson further stressed the need to transform the UK’s approach to energy within all sectors: “A focus on energy independence and efficiency is welcome at this critical time for the UK, but we also need to consider the whole system. This means recognising the interdependencies of systems such as transport, healthcare, manufacturing and energy.
“Therefore, changes in the UK need to be overseen by a system architect that has oversight and accountability for net zero, to avoid unintended consequences.
“We need to consider new builds, alongside a large-scale drive to retrofit existing builds, which will increase the UK’s energy security, create jobs, and grow the economy.”
In the lead-up to the Autumn Budget announcement, many SMEs voiced concerns about a lack of financial support. Ongoing economic instability has plummeted SMEs’ confidence in their ability to remain afloat.
The Chancellor announced that the rate of corporation tax will increase from the current 19 percent to 25 percent from April 2023. However, a £1.6bn Transitional Relief Scheme will be introduced that will cap bill increases caused by changes in rateable values at the 2023 revaluation. Over the course of the three-year scheme, it will allegedly benefit around 700,000 businesses.
The Chancellor has also backed reforms to Solvency II, an EU directive that regulates the insurance industry. He claims that this will unlock “tens of billions of pounds” in investment.
These decisions have been welcomed by the industry. “While there were lots of extra costs for business announced today, the Chancellor has also taken steps to protect growth and investment. The overhaul of Solvency II regulations is a clear signal to channel some of the UK’s pension savings into productive investments in the British economy.
“Combined with the package to support business rates payers, these measures are an important incentive to invest more in UK manufacturing, growth and innovation, including in critical areas such as battery technologies, digital adoption, and green energy systems.
“The pandemic seriously hurt investment and these steps will hopefully provide the kick-start our economy needs to boost productivity and earnings.”
The skills gap
The Government’s research & development budget will also be increased to £20 billion by 2024-25. There will also be reforms to key growth industries such as digital technology, advanced manufacturing and green industries, to help unlock innovation and grow the UK’s labour market.
This focus on areas of growth has, on the whole, received a positive response from experts in the industry, but the IET has also stated that, in order to ensure innovation, more needs to be done to address the skills gap. “Among those engineering employers reporting a digital skills gap in their workforce, 49 percent say it harms productivity and 35 percent say it harms innovation.
“We need to really focus investment on upskilling the existing workforce so they can adapt to new technology. To be a science superpower, the UK needs to tackle the digital skills gaps that will inhibit innovation.”
A concrete, long-term plan is also needed, added Stephen Phipson. “We still need a visionary approach to policy and growth which matches the multiple challenges we face. While a focus on growth sectors is welcome, there remains an absence of an overarching plan for how the big drivers of growth such as skills, innovation and science are brought together.
“This is essential if we are to improve productivity, take advantage of the UK’s undoubted strengths in its academic base and boost growth across all areas of the UK.”
Labour shortages also continue to pose a significant hurdle for the industry: “We currently face a labour crisis and today’s statement did little to address this. Without a fast improvement, Government will need to urgently consider options such as radical changes to the shortage occupations migration list or access to labour from our closest neighbours, if we are to deliver growth,” Phipson said.
On top of research and development investment, school funding will also receive an additional £2.3bn.
EngineeringUK highlighted the crucial role of education in helping to fill the skills gap: “We cautiously welcome the announcement on education spending made today. The Autumn Statement suggests that the Government understands the financial pressures that the education sector is experiencing.
“We look forward to working with Sir Michael Barber on the implementation of the Government’s skills reforms. The engineering and technology sector is crying out for more skilled people and to ensure this we need T Levels to be a success and falling apprenticeships numbers to be addressed.
EngineeringUK further urged the need for collaboration between the Government and industry: “We would welcome a broader look at the education system and hope Government will work with stakeholders to develop a STEM skills strategy and identify any further reforms needed to ensure that we have an education system able to deliver on the UK’s ambitions.”
Cost of living
Of course, alongside the energy crisis, there is a broader cost-of-living crisis that is currently sweeping across the UK, forcing millions to choose between food and warmth. In an attempt to address this, the Government plans to increase the National Living Wage from £9.50 to £10.42 for adults over the age of 23.
Commenting on this increase, Jamie Cater, Senior Policy Manager at Make UK, said: “The increase in the National Living Wage and other rates of the National Minimum Wage reflects the action that many manufacturers are already taking to address the cost-of-living concerns of their staff and continue to attract and retain talent.
“While the Government should be cautious about further large, rapid increases in the NLW which could risk fuelling inflationary pressures and disrupting pay differentials at a time of rising business costs, manufacturers continue to prioritise increasing pay as they seek to invest in and support their employees.”
EVs and net zero
Finally, many in the industry fear that the newly announced road tax on electric vehicles will stall the progress in the transition from diesel, preventing the UK from succeeding in its 2030 net zero goals.
“It’s very concerning that there will be road tax on electric vehicles (EVs) from 2025 as this sends the wrong message about commitments and incentives for net-zero,” said the IET.
“New IET research out this week has demonstrated a clear financial barrier to this being a straightforward process, amplified by the cost-of-living crisis. Government should be providing further support and incentives for EV uptake if they are serious about meeting their 2030 net zero goals.
“Levelling up is a fundamental part of both sustainability and a digital future for the UK. We must ensure that there is a fair route to net zero for everyone and that new technology like 5G ensures that it improves connectivity in all areas of the UK by 2030.”
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