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Manufacturing highlights from the 2021 Autumn Budget

 

The Chancellor’s Autumn Budget contained several measures of interest to manufacturers, including relief for plant and machinery, expanded R&D tax credits and £1.4 billion for critical industries.

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A general summary of measures in the Autumn Budget and Spending Review is available here, but below are some of the more specific items that impact the manufacturing sector.

Global Britain Investment Fund

A new £1.4 billion Global Britain Investment Fund will provide grants to encourage internationally mobile companies to invest in three of the UK’s leading manufacturing sectors, including:

  • £817 million to support investment in zero emission vehicle manufacturing, battery ‘gigafactories’ and the electric vehicle supply chain
  • £354 million for life sciences manufacturing, including medicines, diagnostics and vaccines
  • Up to £230 million for the offshore wind sector and its supply chain.

Business rates and investment

A new business rates relief will be introduced to support investment in green property improvements, including exemptions for eligible plant and machinery for renewable energy generation and storage, such as solar panels and low carbon heat pumps.

The £1 million Annual Investment Allowance for expenditure on plant and machinery, originally due to end on 31 December 2021, will also be extended to 31 March 2023.

Transport

Fuel duty will be frozen for the twelfth consecutive year, despite calls for a tax increase to encourage a switch to electric vehicles. However an additional £620 million has been announced to support the uptake of electric vehicles through more plug-in vehicle grants and public charging infrastructure in residential areas.

The HGV Levy will remain suspended for another 12 months from August 2022.

£5.7 billion was also announced for eight city regions to transform their transport networks into ‘London-style’ integrated systems, including £1 billion for Greater Manchester’s ‘Bee Network’.

Elsewhere, £416 million of R&D funding was announced to help commercialise low and zero emissions transport technologies, including trials of zero emission HGVs.

Energy and Net Zero

The Budget confirmed a raft of new plans published in the government’s new Net Zero Strategy, which has been backed by a total public investment of £30 billion since March 2021. In addition to some of the funding announcements above, this includes:

  • £1 billion to rollout two industrial clusters that will deploy carbon capture, usage and storage (CCUS) technologies in heavy industries. One of these will be the Hynet hydrogen project in the North West, which will support the rollout of hydrogen fuel for use by industry
  • £140 million for a further Industrial Decarbonisation and Hydrogen Revenue Support Scheme to accelerate commercial hydrogen projects and industry adoption of CCUS
  • £315 million for the Industrial Energy Transformation Fund (IETF) to support the demonstration and deployment of clean technologies in energy-intensive industries
  • £120 million for a Future Nuclear Enabling Fund to attract private investment in new nuclear power projects
  • £415 million to grow the heat pump supply chain in England and Wales, with the aim of reducing the cost of heat pump technology by 25-50 per cent by 2025.

Digitisation

£24 million was confirmed to help SME manufacturers across the country adopt productivity-boosting industrial digital technology through the popular Made Smarter programme.

A new Help to Grow: Digital scheme will also launch in December, providing small businesses with free support on how to use digital technology to boost their performance. It will also offer businesses access to discounts worth up to £5,000 towards the cost of buying approved software.

R&D

R&D tax credits, which provide relief for businesses investing in R&D, will expand to cover cloud computing and data costs from April 2023. There will also be tax relief for cutting-edge research in fields such as machine learning and data analytics. 

Government investment in R&D will increase by £5 billion per year to reach £20 billion by 2024-25, the largest ever real terms increase in spending within a single Spending Review period. At least £2.5 billion will be available through Innovate UK.

The increase in investment will also help to fund full association to the EU’s Horizon Europe programme, enabling UK organisations to collaborate with European partners on R&D projects.

Food and drink

The government will introduce new rates for low strength drinks below 3.5 per cent ABV to encourage drinks manufacturers to develop lower ABV products.

A new small producer relief will also be introduced to help small producers diversify their product range to other products below 8.5 per cent ABV, while still benefitting from reduced rates.

Apprenticeships

Apprenticeships funding will increase to £2.7 billion by 2024-25. As part of this, the government will continue to meet 95 per cent of the apprenticeship training cost for small employers who do not pay the Apprenticeship Levy.

The government will also establish an ‘enhanced recruitment service’ by May 2022 for SMEs looking to hire new apprentices.

Finally, the government is extending the temporary £3,000 apprentice hiring incentive for employers until 21 January 2022.

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