Budget boost for infrastructure projects

Infrastructure in northern England received a boost in Parliament today with the announcement that road and rail links are to be improved in the region.

Be afraid

Measures announced in George Osborne’s Spring Budget include approval for HS3, a high-speed rail link between Manchester and Leeds, an assessment of funding requirements for a fourth lane on the M62, upgrading the A66 and A69, and developing a case for a new tunelled road between Manchester and Sheffield.

“I said we would build the Northern Powerhouse,” Osborne told Parliament. “We’re building the roads. We’re laying the track. We’re making the Northern Powerhouse a reality and rebalancing our country.”

A further £80m, has been allocated to develop the case for Crossrail 2 that will connect south west and north east London and is expected to increase tube capacity and reduce the pressure on Victoria and Waterloo stations.

Monies raised by a 0.5% increase on the standard rate of Insurance Premium Tax will be allocated to flood defence spending, adding £700m to the flood defence budget.

“The confirmed financial backing for vital transport projects in the North is excellent news,” said Nick Baveystock, director general of the Institution of Civil Engineers. “The next step should be to underpin this commitment with an integrated plan embracing a mix of ambitious, transformational projects alongside smaller scale investments. If the plan can be developed swiftly, it will maintain confidence in the vision and enable the benefits to be felt sooner. Similarly, the funds allocated to develop the case for Crossrail 2 are welcome, but this should move forward at a good pace so the hybrid Bill can be submitted in Parliament.”

In the energy sector, bids are being invited to help develop the next generation of small modular reactors and the renewables sector is set to benefit from £730m in further auctions.

Commenting on the commitment to the next generation of nuclear reactors, Tom Greatrex, chief executive of the Nuclear Industry Association, said: “Small modular reactors could potentially play a significant complementary role to the UK’s existing new build programme and it is welcome that the government is looking seriously at the development of SMRs. It is important that the road map, the chancellor has promised by the autumn, maximises the opportunities for UK industry.”

Further notable announcements from the chancellor include teaching maths to 18 for all pupils, tax support worth £1bn for the oil and gas industry, a cut in corporation tax to 17% in 2020; trials of autonomous lorry ‘platooning’ and driverless cars to take place by 2017; a £15million ‘connected corridor’ of infrastructure between London and Dover that will be able to comunicate with in-vehicle systems; and the abolition of the Carbon Reduction Commitment, revenues form which will be derived from a rise in the Climate Change Levy – a tax on energy delivered to non-domestic users – from 2019, as noted in an option on The Engineer’s poll this week..

“The Budget was sprinkled with small measures and giveaways to grab headlines,” said John Hicks, director and head of Government & Public, AECOM. “While continued deterioration in productivity was highlighted, it was surprising this theme was not further explored. Unchecked, this could jeopardise the legacy for future generations that the Budget promised.”

Budget in brief

Research and Innovation
The government will allocate at least £50m for innovation in energy storage, demand-side response and other smart technologies over the next 5 years.

Regional devolution
Northern Powerhouse
The government is launching the first stage of a competition to identify a small modular nuclear reactor (SMR) to be built in the UK, and will publish an SMR delivery roadmap later this year. It will also allocate at least £30m of funding for R&D in advanced nuclear manufacturing. This will create opportunities for the North’s centres of excellence in nuclear research, such as the Nuclear Advanced Manufacturing Research Centre and the Sir Henry Royce Institute.

The government is providing a grant of up to £16m to Dyson to support research and development for battery technology at their site in Malmesbury

Aerospace R&D funding – The government is awarding over £16m, matched by industry, to companies and research organisations in the Midlands to support aerospace R&D. This includes £7m to help Rolls-Royce develop new high-temperature alloys in Derby

South West
The government will distribute £14.5m in grants to extend ultrafast broadband coverage in the South West – £4.5m more than the £10m allocated at the Spending Review. As part of its assessment of how the UK can become a world leader in 5G, the National Infrastructure Commission will use the South West as a case study

The government will invest £50m up to 2020-21 to establish a new Compound Semiconductor Applications Catapult in Wales

Patent Box
The government will modify the operation of the Patent Box to comply with a new set of international rules created 106 Budget 2016 by the OECD, making the lower tax rate dependant on, and proportional to, the extent of research and development expenditure incurred by the company claiming the relief. This will come into effect on 1 July 2016. (Finance Bill 2016)

Prof Sir Adrian Smith will review the case for how to improve the study of maths from 16 to 18, to ensure the future workforce is skilled and competitive, including looking at the case and feasibility for more or all students continuing to study maths to 18, in the longer-term. The review will report during 2016

The government will introduce the apprenticeship levy in April 2017. It will be set at a rate of 0.5% of an employer’s paybill and will be paid through PAYE. Each employer will receive an allowance of £15,000 to offset against their levy payment. This means the levy will only be paid on any paybill in excess of £3m. (Finance Bill 2016) The government will apply a 10% top-up to monthly funds entering apprenticeship levy payers’ digital accounts in England from April 2017.
Source: Campaign for Science & Engineering (CaSE)

Reaction round up

On infrastructure & the Northern Powerhouse
“The Northern Powerhouse featured heavily in today’s budget, yet the government has yet to introduce any measures that will substantively transform the growth potential of the North of England. The agenda remains a rather hollow one. There were a handful of announcements on investment into infrastructure projects –all fairly limited in nature, and still paling in comparison to infrastructure investment in London and the South East. George Osborne did a very good job, as he always does, of trumpeting the significance of project that would be undertaken as a matter of routine in similar economies in North America, Western Europe and East Asia.”
Dr Craig Berry, deputy director of the Sheffield Political Economy Research Institute (SPERI)

“The creation of new and improved infrastructure is the means to the end, not the end itself, so the focus needs to be on delivering these schemes quickly in order to start generating the economic benefits we need now. Particularly in the case of the Northern Powerhouse, government spending on new and improved infrastructure will be vital in attracting much needed funding from other sources and delivering the productivity improvements that the government has set out.”
Nick Roberts, Atkins’ chief executive officer for UK & Europe

On digital infrastructure
“Manufacturers need best in class provision if Britain is to take advantage of the next industrial revolution, industry will welcome today’s announcement of a Broadband Investment Fund which must be targeted to ensure this leads to a reduction in costs for business broadband by stimulating alternative providers. Only a fifth of companies believe the UK is currently at the forefront of internet connectivity.”
Chris Richards, EEF senior business environment policy adviser

“The influence of technology and data is enabling us to be smarter and more efficient in the way we use and deliver infrastructure. I welcome the funding and commitment to our digital economy and to make trials of driverless cars a reality on our roads by 2017, but would have liked to have seen more. I believe we have a real opportunity for the UK to lead the worldwide digital infrastructure revolution but we have to invest more in ensuring our infrastructure can keep up with the pace that technology is developing and evolving.”
Nick Roberts, Atkins’ chief executive officer for UK & Europe

On small modular reactors
“The development of a UK small modular reactor would provide us with the opportunity to build on the UK’s proud heritage in the civil nuclear industry and to harness our world leading capability in advanced manufacturing. Small modular reactors could put UK technology development on the fast track and position UK manufacturers for valuable research partnerships and create a strong likelihood of securing volume export business. We would be making real progress to securing our energy future and make a real contribution to a sustainable low carbon economy in the UK.”
Mike Tynan, chief executive of the Nuclear AMRC

On finance
“We were disappointed that the chancellor has not done more on business rate reform. The removal of plant and machinery from business rates valuation would have encouraged investment in innovative manufacturing technologies, improving still further UK automotive industry productivity and safeguarding our competitiveness.”
Mike Hawes, SMMT chief executive

“With interest rates as low as they have ever been, combined with the tax cuts announced in today’s Budget, it makes financial sense to invest [in new technology]. If we don’t take the opportunity now we may miss it forever. We would have welcomed movement on Capital Allowances from the Chancellor to help further stimulate investment into UK manufacturing. However, the strong message we can take from this Budget is the UK needs to improve productivity.”
James Selka, CEO of the Manufacturing Technologies Association

On education
“Government plans to teach mathematics until the age of 18 for all pupils is very positive news.  This will pose a challenge for establishing more imaginative ways of engaging the interest and ability ranges of all young people. Engineers use maths as a tool for solving real-world problems and this should be better reflected in school education. Many more school pupils will develop greater numeracy if they have an opportunity to experience problem-based learning.”
Dr Colin Brown, director of engineering at IMechE