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Budget 2020: What does it mean for manufacturers?

The Coronavirus outbreak dominated this year’s Budget, but there were plenty of other notable announcements - from rising R&D spending to record investment in infrastructure.

Launching the Budget on 11 March, Chancellor Rishi Sunak said the government would do “whatever it takes” to support the economy during the Coronavirus crisis.

Coronavirus

The Budget includes a £12 billion package of temporary measures to support public services, individuals and businesses. For businesses, this means:

  • SMEs will be able to reclaim up to 2 weeks’ Statutory Sick Pay (SSP) per eligible employee who has been off work because of Coronavirus
  • The Business Rates retail discount for shops, restaurants, cafes, drinking establishments, cinemas and live music venues will be increased to 100 per cent for one year, benefitting an estimated 900,000 properties across England
  • A one-off grant of £3,000 will be available for small businesses which already pay little or no Business Rates because of Small Business Rate Relief (SBBR)
  • A temporary Coronavirus Business Interruption Loan Scheme will be launched by the British Business Bank to help companies access bank lending and overdrafts
  • All businesses in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service.
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Chancellor of the Exchequer Rishi Sunak with the Budget briefcase. Credit: Picture by Harriet Pavey/ No 10 Downing Street

Infrastructure

Beyond the Coronavirus, the Budget featured several other big announcements, not least a £640 billion increase to public spending on infrastructure by 2024-25. This includes the largest ever investment in strategic roads, £5 billion to support the roll-out of gigabit-capable broadband and nearly £11 billion to boost housebuilding.

R&D

There were also major announcements on research and development (R&D). Public R&D investment will be increased to £22 billion per year by 2024-25 - the UK’s largest and fastest ever expansion in R&D spending. To support private investment, the government announced an increase in R&D tax credits to 13 per cent.

Sir Jim McDonald, President of the Royal Academy of Engineering, commented:

“We are deeply impressed with the government’s commitment to more than double UK public spending on R&D. It is vital to enhance spending on creative new ideas and catalysing innovation if our world-leading engineering research and enterprises are to reach their full potential."

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Wages

On salaries, the Budget revealed plans to increase the National Living Wage (NLW) to two-thirds of media earnings. Based on current forecasts, this means the NLW will surpass £10.50 by 2024, building on the 6.2 per cent increase to £8.72 which takes effect from April 2020. The NLW will also be extended to workers aged 21 and over by 2024.

Tim Thomas, Director of Employment & Skills Policy at Make UK, commented:

“Whilst manufacturers strive to attract the best talent with wages to match, a single National Living Wage will increasingly have a regional impact, particularly in the North and Wales, and may lead to pay pressures for skilled and semi-skilled workers.”

To cut the cost of taking on staff, the National Insurance Contributions (NICs) Employment Allowance will be increased from £3,000 to £4,000. This means businesses will now be able to employ 4 full-time employees on the NLW without paying NICs.

Skills

Later this spring, a public consultation will be launched on plans for a new £2.5 billion National Skills Fund, which will help adults to train and retrain in technical skills over their lifetime. An additional £1.5 billion will be spent on cutting-edge facilities for Further Education colleges over the next five years.

Tim Thomas added:

“Extra capital funding for the entire FE college estate is both welcome and needed. With T Levels around the corner for manufacturers, funding for new capital equipment which is often a roadblock to greater technical training cannot come too soon.”

Greener fuels

To encourage more environmentally-friendly heating methods, the government plans to introduce a Green Gas Levy to fund the use of greener fuels like biomethane. The Climate Change Levy that businesses already pay on gas will also increase from 2022-23 to incentivise a switch to electric heating methods. In addition, from 2022 the entitlement to use red diesel will be removed in all cases except for agriculture, fish farming, rail and non-commercial heating.

The Budget also included a £533 million funding package to extend the plug-in grant scheme for electric cars and vans to 2023.

Packaging

From 2022 the government will introduce its long-awaited Plastic Packaging Tax at a rate of £200 per tonne on plastic packaging which contains less than 30 per cent recycled plastic. Money has also been set aside to develop a new Extended Producer Responsibility scheme, which will encourage producers to make their packaging more recyclable and reduce the amount of unnecessary packaging in products.

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