Industry and skills groups react coolly to government budget

Article by Adam Duckett

THE UK’s spring budget has received a mixed reaction from engineering and manufacturing groups, as the chancellor unveiled investments in new nuclear and drugs manufacturing but fell short on CCUS and skills.

Jeremy Hunt announced that AstraZeneca plans to invest £450m (US$573m) in a new vaccine research and manufacturing facility at its site in Speke, Liverpool. The UK government also plans to spend £200m expanding its R&D facilities in Cambridge, possibly creating another 1,000 jobs on top of the 2,300 researchers and scientists currently employed there.

Hunt pointed to a competitive business tax regime for the investment. Last year the government introduced full expensing – a tax deduction for investment in plant and machinery – to help boost growth in manufacturing.

“I have long believed we should be manufacturing medicines as well as developing them,” Hunt told MPs.

The investment decision is not finalised yet with regulatory hurdles still to be overcome. The sector will watch with interest how investment in a new facility, billed as providing pandemic preparedness, proceeds given the shock sale of the government’s dedicated vaccine manufacturing facility (VMIC) in 2022.

A move welcomed by manufacturers was Hunt’s announcement that government will publish draft legislation extending full expensing to assets leased by companies.

Fhaheen Khan, senior economist at the manufacturing trade group MakeUK, said: “Extending full expensing to leased assets will especially support smaller manufacturers while, further down the line, the government should explore whether it can be expanded further to support sustainability goals by covering refurbished, second-hand technologies.”

Nuclear land purchase and quicker grid connections

As part of the UK’s ongoing push for nuclear expansion, Hunt said the government has agreed a £160m deal with Hitachi to purchase the Wylfa site in Anglesey and the Oldbury site in Gloucestershire, though no decisions have been reached yet on building nuclear plants at the sites.

In January, the government unveiled plans to build small modular reactors (SMRs) and conventional large-scale plants to meet its target of increasing nuclear power output from 6.5 GW today to 24 GW by 2050 in a bid to boost low carbon power. Hunt said the six firms selected last year to bid for contracts to build SMRs have now been given until June to submit their tender responses.

Tom Greatrex, CEO of the Nuclear Industry Association, said: “This is a pivotal moment for the future of nuclear in the UK and should mark the beginning of new projects at these sites. Wylfa is one of the very best sites for new nuclear anywhere in Europe and there is great promise for a series of SMRs at Oldbury. The success of ramping up nuclear capacity for energy security and net zero rests a great deal on whether we develop at these sites and others.”

Green MP Caroline Lucas opposed the move: “Whatever the chancellor says, this white elephant is eye-watering expensive, plagued by delays and too slow to help meet our targets for decarbonising the electricity system.”

Missing urgency

Measures unveiled to bolster the renewables sector include an increase in the contracts for difference (CfD) budget, providing a guaranteed electricity price for low carbon generation. There are also measures to shorten the decade-long delays connecting power projects to the grid, with Hunt announcing a “stringent connections process” that will be implemented in January 2025. This will see projects only offered a specific connection date once they are ready to progress.

The Association for Renewable Energy and Clean Technology (REA) said it was disheartened by the budget as it did not fully support the net zero industry, which it said grew 9% in 2023 compared to the wider economy which stagnated at 0.1%.

“This is a political budget above all that does not reflect the urgency of net zero,” said Frank Gordon, director of policy at REA. “In particular, the chancellor had promised the sector a response to the US investment in green supply chains and manufacturing at the last fiscal event and to see very little once again on how we can ensure the UK does not miss out on the vital green jobs and investment up for grabs is very disappointing.”

There was also a cool reaction to investment of £120m in carbon capture use and storage (CCUS) and hydrogen targeted to support low carbon manufacturing supply chains.

Ruth Herbert, CEO of the Carbon Capture & Storage Association said: “The UK’s CCUS industry is still waiting for the funding announced in last year’s spring budget to be committed to projects, with final investment decisions for projects in the northwest and northeast of England needed in the next few months.

“Today’s budget was a missed opportunity for the government to put in place a longer-term revenue support envelope for the next wave of projects – to provide the level of certainty they need to move forwards. Without this, the UK risks losing the opportunity to attract around £30bn of private investment into UK CCUS by 2030, which would create and protect tens of thousands of jobs and transform industrial regions across the UK.”

Likewise, the UK Chemicals Industry Association (CIA) said the budget did not go far enough to help a sector that last month reported a sixth consecutive quarter of contraction.

Steve Elliott, CEO of the CIA, said: “UK chemical businesses are facing huge competition from other parts of the world in terms of cheaper energy costs and more competitive and stable investment climates, so I remain at a loss over how we compete now. We are ready to play our part in delivering those critical clean-tech solutions for society, but we need far greater urgency and ambition, framed around an industrial strategy for our country and our sector.”

Skills stutter

Trade groups, including the CIA, had called on the chancellor to do more to support the skills necessary to deliver advanced manufacturing and clean growth. The only related measure announced today was confirmation of a £50m apprenticeship growth pilot that will give providers of 13 apprenticeships including for pipe welders, nuclear technicians, and laboratory technicians £3,000 for each starter.

Last week, IChemE hosted a meeting with MPs to discuss measures that would help avoid a green skills crisis, including a rationalisation of apprenticeship schemes.

EngineeringUK, which has warned the country is sleepwalking into a net zero skills crisis, said it was “extremely disappointed” that there is no mention in the budget of the need to invest more and focus on skilling the future workforce.

Beatrice Barleon, head of policy and public affairs at EngineeringUK, said: “We renew our ongoing call for the government to develop a clear and properly funded STEM skills plan. This should include investment in careers outreach and education, apprenticeships for young people aged 1619 and commitment to sustaining existing funding levels for STEM teacher professional development.”

Article by Adam Duckett

Editor, The Chemical Engineer

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