Business Support
• ‘To further support innovative start ups and early stage companies to invest in research and development, the government will raise the rate of the R&D tax credit payable to loss taking small and medium sized companies from 11% to 14.5% from April 2014. Over the next 5 years this increase will support £1.3 billion of investment in innovation.’
Energy
• ‘Reduce business energy costs to ensure that the UK remains a competitive location for manufacturing, including by capping the Carbon Price Support rate at £18 from 2016-17 to 2019-20 and providing targeted support to energy intensive industries and Combined Heat and Power plants’
• ‘While UK electricity prices are currently close to the International Energy Agency (IEA) average, a typical EII in Britain currently pays almost 50% more for their electricity than they do in France, and the cost to businesses of policies to deliver new low-carbon energy infrastructure is set to increase by around 300% by 2020.51 This Budget announces a package of reforms to radically reduce the costs of energy policy for business – particularly in manufacturing – while improving security of supply and maintaining the government’s ambition to increase renewable generation. This package will benefit every household, business and region in the country saving a total of up to £7 billion by 2018-19. This will particularly benefit the most energy intensive manufacturers, around 80% of which are based in the North of England, Scotland and Wales.’
• ‘The UK’s Carbon Price Floor (CPF) sets a rising trajectory for the carbon tax paid by electricity generators, which raises the cost of electricity. The government remains committed to the CPF as a means to stimulate investment in low carbon infrastructure, but is capping the Carbon Price Support rate at £18.00 from 2016-17 to 2019-20 to limit any competitive disadvantage British companies face in the global race. This could save British businesses up to £4 billion by 2018-19, over £1.5 billion in 2018-19 alone, and £15 off a typical household energy bill in the same year. The government believes it is vital to reform and strengthen the EU Emissions Trading System, including through agreement of an ambitious EU climate and energy package for 2030. The government will review the CPF trajectory for the 2020s, including whether a continued cap on the Carbon Price Support rate might be necessary, once the direction of reform of the EU Emissions Trading System is clearer.’
The Institution of Mechanical Engineers believes there is no reason to handicap the UK with unnecessarily high energy costs in an increasingly competitive world. Mitigation of climate change through a reduction in greenhouse gas emissions needs to be tackled, but the UK cannot afford to go it alone industrially in this regard, alternative solutions and approaches need to be found to take steps in the right direction while international action is not forthcoming.
• ‘The government wants the UK to be the best place in the world to invest in innovative new technologies. The government is therefore providing £60 million for new low carbon innovation to support carbon capture and storage (CCS) technologies that show significant potential to reduce the cost of low-carbon generation in the UK.’
• ‘The government is committed to maximising the benefit of North Sea oil and gas for the UK economy. Sir Ian Wood’s review clearly set out the size of the prize that remains in the North Sea – and the government will ensure that it has the right long-term plan to capture this value. Budget 2014 announces that the government, working with the new oil and gas body, will review the UK’s tax treatment of the North Sea to ensure that it continues to incentivise economic recovery as the basin matures.’
• ‘The government has already provided significant tax incentives for oil and gas projects that have unlocked billions of pounds of investment – around £7 billion in 2013 alone. Building on the success of these allowances and embracing the challenges set out by Sir Ian, the government will introduce a new allowance for ultra high pressure, high temperature (HPHT) clusters and consult on the details. The allowance is expected to support the development of big HPHT projects which would create and sustain thousands of jobs, provide a significant portion of UK gas demand, and generate billions of pounds of capital investment. The new allowance will also encourage exploration in the central North Sea and help position the UK’s supply chain to become world leading in this important new technology.’
• ‘The government is committing to work with the oil and gas industry to ensure that the UK has the right skills and supply chain in place to benefit from the huge potential of the country’s oil and gas reserves. This will be crucial not only to ensure the UK benefits fully from its shale gas reserves, but also the offshore oil and gas fields – including new high pressure, high temperature projects – and to make the UK’s oil and gas supply chain world leading, creating local jobs and growth across the UK.’
This continuing support is welcome, especially in maximising all the resources available in the North Sea. However, the Institution does wish to see more specific details on how these investments will benefit the UK economy and employment and not overseas companies, as well as a credible long-term plan for how the UK will affordably and securely make-up for the depletion of these supplies in its future energy mix.
The Institution welcomes the Chancellor’s commitment to nuclear and renewable. However, what is needed is firm action to expand our nuclear industry, we still await confirmation of investment 'go-ahead' in the one power station for which a strike price has been agreed, while an entire fleet is needed to replace the nation's retiring stations.
The continuing support for renewable also needs renewed commitment to R&D investment.
We continue to support the exploration of the potential for UK shale gas, but again note that this one route should not be seen as a panacea to future energy security and supply.
Education, science and innovation
• ‘Apprenticeships play a vital role in equipping young people with the skills they need to compete in the labour market, and that employers need to grow their businesses. The government is building on the success of the Apprenticeship Grants for Employers (AGE) scheme, by providing an extra £85 million in both 2014-15 and 2015-16 for over 100,000 grants to employers. The Government will ensure that grants are targeted where they are most effective.’
The Institution supports extending the Apprenticeship Grants for (SME) Employers of 16 to 24 year olds, since successful outcomes of this renewed commitment to technical and vocational training will rely heavily on uptake by small and medium sized companies.
• ‘The changing nature of the labour market is demanding higher skilled workers. There are however potential barriers in the postgraduate system that may be restricting the supply of these higher skills. To ensure the UK can compete successfully in the global economy, the government will investigate options to support increasing participation in postgraduate studies and will put forward its ideas at Autumn Statement 2014.’
• ‘Science and innovation are key drivers of long-run economic growth. The government will continue its drive to help commercialise research and ensure the UK economy benefits from its world leading science base. This Budget announces that the government will:
i) provide £42 million over 5 years for the Alan Turing Institute – this will be a national institute which will undertake new research in ways of collecting, organising and analysing large sets of data (‘Big Data’); Big Data analysis can allow businesses to enhance their manufacturing processes, target their marketing better, and provide more efficient services
ii) invest £74 million over 5 years in a Cell Therapy manufacturing centre and a graphene innovation centre as part of the UK’s Catapult network – these will enable large-scale manufacturing of cell therapies for late-stage clinical trials, and will provide SMEs with access to cutting-edge equipment for research and development of novel graphene products.’
The Institution welcomes the continuing support for graphene, a truly British invention with a multitude of future possibilities. The creation of a new centre of excellence will advance the already committed £111m to graphene research and exploitation.
Infrastructure and transport
• ‘The government has made significant progress this year on the delivery of High Speed 2 (HS2), depositing a hybrid bill in Parliament, and appointing Sir David Higgins – former Chief Executive of Network Rail and the Olympic Delivery Authority – as Executive Chairman of HS2 Ltd. Sir David Higgins recently set out his proposals to maximise and accelerate the benefits HS2 can offer.56 In response to this report, the government has commissioned HS2 Ltd to develop proposals for accelerating the project and opening the line to Crewe by 2027, 6 years earlier than planned, as well as exploring options for undertaking a substantial redevelopment of Euston station, one of the biggest undeveloped commercial opportunities in central London.’
The Institution welcomes the support for HS2 and the Chancellor’s vision of seeing this beyond the current plans. The Institution however, wishes to see this furthered with a commitment to see a HS map for the entire UK, creating a new rail network for the 21st century and beyond. The Institution does however, urge an ending to the delays, noted to the end of the year. We would urge that this begins over the summer.