Summer Budget: Industry response
8 Jul 2015
Chancellor George Osborne presented his 2015 summer Budget to Parliament earlier today but drew a mixed reaction from the engineering industry.
Inside a packed and at times boisterous House of Commons, Osborne delivered the first majority Conservative Budget in almost 20 years.
In the build-up to today’s Budget, there was much speculation as to what the Chancellor would present, and where the anticipated spending cuts would be made.
No tolerance for recreating the failed skills bureaucracy of the past
EEF chief executive Terry Scuoler
It was no surprise, therefore, when Osborne announced cuts to tax credits, universal credit and household benefits.
For British industry, however, the Chancellor’s message wasn’t as clear cut, nor was the industry’s response.
Offshore reaction
For the oil and gas industry, and in particular the UK Continental Shelf (UKCS), Osborne built upon March’s Budget announcement regarding the Investment Allowance – effectively broadening the types of investment that qualify.
“With continued signs that investment in the UKCS is falling rapidly, it is vital the scope of the Investment Allowance, announced in the March Budget, encourages all forms of productive investment if it is to provide the strongest engine for growth,” said Deirdre Michie, chief executive of industry trade body Oil & Gas UK.
“We are pleased to note that the government has today taken steps to extend this allowance as they previously proposed and eagerly anticipate the required legislation by the end of the summer,” Michie added.
Food for thought
Other sectors, particularly manufacturing and renewables, responded in a less than favourable manner to the Chancellor’s Budget.
Osborne’s handling of Science, Technology, Engineering and Maths (STEM) shortages issues caused the most frustration.
Director general of industry body the Food and Drink Federation (FDF) Ian Wright cited food and drink as the largest manufacturing sector in the UK, but could not see a clear skills message in the Chancellor’s Budget.
“Our sector is facing significant skills shortages, particularly in engineering and technical roles and the apprenticeship route is a hugely important way to build our talent pipeline,” Wright said.
“We will be seeking further clarity on the detail of the apprenticeship levy as it is not clear how this will deliver the highly skilled professionals we need and meet the needs of both employers and workforce,” he said.
Similarly, and although Helen Meese, head of engineering in society at the Institution of Mechanical Engineers (IMechE), welcomed some of the proposals outlined in the Budget, she said the government must go “much further” if it wants to secure the country’s skills.
“The UK’s skills shortage is one of the most critical issues facing the country,” Meese said.
“Without engineers we have no hope of making the large infrastructure projects needed in the energy, transport and health sectors a reality.”
Divided opinion
Like Meese, EEF chief executive Terry Scuoler had a mixed reaction to the Budget.
Through a series of tennis-related puns, the manufacturing trade body boss said the Chancellor had served up “a number of aces” in supporting business investment allowances, phased reductions in corporation tax and funding for road improvements.
“However, he has ’double faulted’ on the training levy which manufacturers will be sceptical about. Until we see the detail it is not clear how this will help deliver the high quality apprenticeships we urgently need,” Scuoler said.
“Employers must be in the driving seat on this reform to ensure we get the right quality of apprenticeships and training.
“There will be no tolerance for recreating the failed skills bureaucracy of the past.”
Unexpected announcement
Meanwhile, members of the renewables sector have slammed the Chancellor’s budget dubbing it “retrogressive” and accusing the government of “moving the goalposts” yet again.
“The Chancellor’s announcement that renewable electricity will no longer be exempt from the Climate Change Levy is a punitive measure for the clean energy sector,” said Gordon Edge, RenewableUK’s director of policy.
“Until now, Levy Exemption Certificates (LECs) generated as a result of the CCL have provided vital financial support for renewable energy producers.
“The Chancellor says the removal of the exemption will earn the Treasury £450 million in 2015/16, rising to £910 million in 2020/21,” Edge said.
“We’re suddenly looking at a substantial amount of lost income for clean energy companies which was totally unexpected,” he added.
Likewise, Charlotte Morton, chief executive of the Anaerobic Digestion and Bioresources Association (ADBA), said that although Osborne addressed the need to support Britain’s future, “there was no reference to the importance of food and energy security, or the need to support green industry to drive economic growth”.
“While ADBA’s latest market report demonstrates that the number of biomethane plants has tripled between 2014 and 2015, there are unlikely to be any new biomethane plants without signalling an extension to the RHI budget beyond March 2016,” Morton said.
“Home grown green gas can potentially meet as much as 30% of the UK’s domestic gas demand - reducing our dependence on imported natural gas from Qatar and Russia - or fuel around 80% of heavy goods vehicles.”
