Spring Budget 2023: What are engineering experts saying?
Author : Sophia Bell, Group Editor, DPA
16 March 2023
From energy to AI, from labour shortages to investment zones; here, DPA provides a comprehensive round-up of what CEOs, academics and top industry bodies have to say about Jeremy Hunt's Spring Budget.
In an attempt to tackle future energy price shocks, the Government is launching Great British Nuclear (GBN), which will support new nuclear builds. Nuclear energy will also be included in the green taxonomy, subject to consultation, to encourage private investment.
The Government has announced plans to launch the ‘first staged competition for small modular reactors’, and will select the best designs from domestic and international vendors by the end of the year, with the aim to co-fund the new technology if it proves to be viable.
The investment in nuclear energy was welcomed by some in the sector, with Tom Greatrex, Chief Executive of the Nuclear Industry Association, saying: “This is a huge step forward for UK energy security and net zero. Nuclear’s inclusion in the UK Green Taxonomy is a vital move, following the example set by other leading nuclear nations, and will drive crucial investment into new projects, making it cheaper and easier to finance new reactors.
“The launch of Great British Nuclear, with powers to select sites for new projects, will make nuclear deployment much more efficient and give the supply chain a clear pipeline to work from. The SMR selection will put us back in the global race, creating opportunities for home-grown technology and others to bring jobs and investment to the UK and helping us capitalise on export opportunities in a massive global market.
However, the announcement was treated with scepticism from others: Professor Adrian Bull, BNFL Chair in Nuclear Energy and Society at the Dalton Nuclear Institute, University of Manchester, said: “The Chancellor’s words on nuclear give a positive message, but it’s more like a ‘greatest hits’ compilation from the past, rather than anything new.
“He’s announced ‘Great British Nuclear’ – which is about the fourth time it’s been announced. What we need is to see it actually come into being, and to see a clear plan of what it will do.
“And – bizarrely – he launched ‘the first competition for small modular reactors’ (SMRs). Maybe there is nobody left in Whitehall who remembers the (abortive) SMR competition which George Osborne launched back in 2015, promising an SMR in the UK in the 2020s. Let’s just hope this one actually leads to something!”
Energy efficiency and the road to net zero
£20 billion will be invested in Carbon Capture, Usage and Storage (CCUS), to help meet the Government’s net zero goals. This will unlock further private investment and support job creation across the UK. There are also plans to extend the Climate Change Agreement scheme for a further two years to encourage energy efficiency.
James Earl, Director of Gas, ENA, which represents the UK's energy network operators, responded positively to this funding: “Today’s clean energy funding represents a significant step forward for carbon capture and storage (CCS) in the UK.
“This also represents a major milestone for the development of low-carbon hydrogen in the UK. The first production sites will get the hydrogen economy up and running, providing clean energy to industrial sites and taking the first steps towards hydrogen becoming a real-life choice for consumers.
“It is important that we build on this platform now to accelerate the growth of hydrogen production, transport and storage infrastructure, as well as by setting out a process for the second tranche of CCS clusters as soon as possible.”
Professor Stuart Haszeldine, Professor of carbon capture and storage at the University of Edinburgh, agreed that this decision marked a decisive moment for the UK’s net zero journey. “The Spring Budget 2023 will likely be viewed from mid-century as the time when the UK fully committed to Carbon Capture and Storage.”
However, he added: “There are still warnings to be considered. How do the Danes and Norwegians progress their projects from start to first injection in two-to-four years, when the UK takes nine years?
“And how can a market supply of CO2 to storage be guaranteed into the future, whilst also decreasing state subsidy to make CCS become business as usual?
“An answer surely lies in the Carbon TakeBack Obligation, where any fossil fuel producer or importer is tasked by [the] Government to store an ever-increasing percentage of the CO2 arising from the use of their product.”
Furthermore, according to some industry experts, not enough is being done to tackle skyrocketing energy bills.
Brigitte Amoruso, Energy & Climate Change Adviser, commented: “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.”
Professor Aoife Foley, Chair in Net Zero at the University of Manchester, further stressed the need to invest in other clean energy initiatives to ensure long-term resilience. “It is disappointing not to see greater incentives for solar and wind power and energy efficiency schemes for agriculture. Speaking to distributed grid operators, repowering onshore wind and scaling solar power are both really important for security and network planning.
“Implementing cross-cutting energy plans quickly and effectively is vital to our economic vitality, success and longevity in a carbon constraint global economy.”
Manufacturers were also disappointed in the lack of investment in facilitating the transition to electric vehicles.
In light of the silence around funding for the battery supply chain, 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 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. “
Recognising the impact of recent developments in AI, such as the launch of ChatGPT, the Government has also announced plans to capitalise on digital technologies. It will invest around £900 million to build an exascale supercomputer and to establish a new AI Research Resource, with initial investments starting this year.
The Government will also award a £1 million prize every year for the next 10 years to researchers that drive progress in critical areas of AI.
Nick White, Partner at law firm Charles Russell Speechlys, said: “This investment underlines how seriously the Government is taking its commitment to ensuring the UK is a global science and technology superpower by 2030.
"The UK will be behind the US, the EU and probably China too, in building an exascale machine. However, it should be a huge boost to the UK’s ability to support cutting-edge research in areas requiring complex modelling and simulations, such as climate change, pharmaceutical development and hi-tech engineering."
The Government’s Quantum Strategy will see a £2.5 billion investment over 10 years, focusing on four key goals: “ensuring the UK is home to world-leading quantum science and engineering; supporting businesses through innovation funding opportunities and by providing access to world-leading R&D facilities; driving the use of quantum technologies in the UK; and creating a national and international regulatory framework.”
Sir Jim McDonald FREng FRSE, President of the Royal Academy of Engineering, commented: “This is important for enabling continued innovation in a highly significant emerging technology where the UK has many world-class strengths and demonstrates that the Government appreciates the competitive advantage of such long-term commitment in strategic technologies, a very welcome change from previous shorter-term plans.”
The Government is attempting to plug the skills gap by encouraging the over 50s to retrain through increasing tax relief on pensions, as well as providing more support to people with disabilities. It will also roll out initiatives to remove barriers to parents working, by providing free childcare for eligible working parents of children from nine months, until they start school.
However, Beatrice Barleon, Head of Policy & Public Affairs at EngineeringUK, says this is not enough to tackle the perennial problem facing STEM industries.
“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.”
The Spring Budget will see refocused Investment Zones, catalysing 12 “growth clusters” across the UK. Each will bring an investment of £80 million over the space of five years, to key areas such as green industries, digital technologies, and advanced manufacturing.
Hayaatun Sillem, CEO of the Royal Academy of Engineering, greeted this news with enthusiasm, saying: “The announced investment zones and funding for R&D projects are welcome efforts to stimulate investment in engineering, science, and technology across the UK and boost local innovation ecosystems.
“With hotspots of engineering in many regions of the UK, more than 8.1m people are part of the nation’s engineering economy, generating an estimated £645bn gross value added to the UK economy each year – equivalent to 32 percent of the country’s economic output. Engineering innovation is integral to achieving a growing and inclusive economy.”
R&D tax relief
The Government will also introduce full expensing for three years from 1 April 2023, allowing UK companies to write off the full cost of qualifying plant and machinery investment in the year they invest. There are further plans to make this measure permanent when fiscal conditions allow.
Furthermore, to help encourage economic innovation, there will be support for R&D-intensive SMEs, via an enhanced rate of tax relief for loss-making companies.
Mark Minihane, Advanced Manufacturing and Mobility Tax Leader at EY in the UK, said that this is a positive first step, but more needs to be done to support the 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.
“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.”
The bigger picture
In conclusion, much like the Autumn Budget 2022, there are positives and negatives for the manufacturing industry. It seems that some positive first steps have been taken, which are a source of optimism for many. However, there is still much more that needs to be done in several areas, including energy.
So, what impact will the Spring Budget have on manufacturing in the long term? Stephen Phipson, Chief Executive of Make UK, summarised: “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.”