Promising to “invest, invest, invest”, Reeves announced tax increases of £40bn, which will mainly be raised through an increase in National Insurance contributions from employers.
The statement also set out plans to protect record levels of government R&D investment, with £20.4bn billion allocated for 2025-26. “In this budget, chancellor Rachel Reeves has recognised both the contribution of R&D to economic growth and the importance of long-term stable funding for UK science and innovation to flourish,” said Matt Rooney, IMechE head of policy.
“Going forward, the government’s focus should be on working with the engineering sector to deliver an Industrial Strategy that will boost productivity and support the development of a skilled workforce whilst delivering on our net zero commitments.”
Here are three more of the budget’s most important points for engineering and industry.
HS2’s Euston terminal gets back on track
Speaking in parliament, Reeves made the long-awaited announcement that HS2 trains will run to Euston, instead of terminating at Old Oak Common. A planned increase in capital investment will fund tunnelling from the west London station to the central London terminal. This will “catalyse private investment” into the station and local area, the budget added.
After years of uncertainty, the High Speed Rail Group called the news “a pivotal step forward”. The industry body added: “We hope that an era of fragmented, short-term decision making has been ended, in favour of a move towards a cohesive vision for the future of UK rail.
“However, we cannot stop here. To fully realise the socio-economic benefits of this project, it is critical that Phase 1 is properly connected north of Birmingham, to Crewe and beyond.
“Taking a long-term, integrated approach to rail delivery going forward will enable HS2 and the broader network to fuel the UK’s economy and enhance productivity for generations to come.”
Green hydrogen growth
‘Green’ hydrogen – produced using renewable energy – got significant backing in the budget, with funding announced for 11 projects. Described by Reeves as “amongst the first commercial scale projects anywhere in the world”, planned locations include Bridgend in Wales and Barrow in Furness in England.
“The government will provide support for the first round of electrolytic hydrogen production contracts, harnessing renewable energy to decarbonise industry across the length and breadth of the UK. The settlement will provide £134m to support the delivery of port infrastructure to facilitate floating offshore wind,” the budget added.
“The government’s commitment to 11 new green hydrogen plants will… support their goal of making Britain a clean energy superpower,” said James Bamborough, sustainability and net zero policy manager at the Institution of Engineering and Technology.
“However, transitioning to hydrogen will require a range of technical skills in addition to academic and industrial researchers, through to project management and customer-facing skills. The deployment of green hydrogen must be part of a holistic approach to the energy transition and the £6.1bn support for core research funding in engineering will help nurture groundbreaking technologies and innovation in the energy sector.”
Building future skills
The recently announced creation of Skills England will help “make work pay and tackle economic inactivity”, Reeves said. She also announced plans to transform the Apprenticeship Levy into a ‘Growth and Skills Levy’ with an investment of £40m, delivering foundation and shorter apprenticeships in key sectors.
“The reformed levy will be developed in partnership with employers, providers, and learners. Skills England will take the time to consult with a wide range of partners to ensure that levy-funded training meets the needs of employers, providers, and learners, and secures good value for money,” the budget said.
“We welcome the chancellor’s commitment to invest in education and skills as a central pillar of the government’s growth agenda,” said Beatrice Barleon, head of policy and public affairs at EngineeringUK.
“We look forward to continuing to support the government to develop a new Growth and Skills Levy, ensuring an apprenticeships system that provides ample routes into engineering and technology careers for young people.
“The pledges of significant funding uplifts for school budgets and further education colleges will be key to addressing the teacher recruitment crisis, which is particularly acute in STEM subjects.”
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