Osborne said his Budget speech outlined Britain’s industrial ambition, and included reforms to the financial environment in which businesses operate.
These include the implementation of a ‘patent box’ to encourage investment in R&D and related manufacturing in the UK, by introducing a lower rate of corporation tax on profits generated from UK-owned intellectual property.
From April 2013 eligible profits from worldwide sales of products protected by a granted UK or European patent will be taxed at 10 per cent. An ‘above the line’ R&D tax credit will be introduced in 2013 also.
UK universities are to receive £100m, alongside the private sector, for investment in major new university research facilities.
To be administered by Higher Education Funding Council for England, the funding will be dedicated to large capital projects that lever significant private investment, such as joint research facilities.
Commenting on the announcement, Research Councils UK said: ‘This funding is a boost to UK research, which has seen reductions to capital budgets, as it will help accelerate private sector investment in research infrastructure. Investment in the research base is essential to stimulating growth and this new funding acknowledges how vital research is to the economic prosperity and societal wellbeing of the UK.’
‘Today’s announcement is the latest in a string of pledges of extra cash for science and engineering, and shows that the government does understand that we cannot have a rebalanced economy without investment in research,’ added Imran Khan, director of CaSe (Campaign for Science & Engineering) in a statement. ‘I suspect the government realises that the multi-billion pound, 50 per cent cut made to research capital in 2010 simply is not sustainable. Despite difficult times they are trying to put it right, and it is not going unnoticed.
‘However, simply reversing cuts isn’t going to be a game-changer for the UK. We need to be far more ambitious if we’re serious about having a high-tech future.’
UK Centre of Aerodynamics
The chancellor also revealed in his speech that the government will provide £60m to create a new world-class UK Centre for Aerodynamics that will open in 2012–13 to support innovation in aerospace technology.
In a statement, trade organisation ADS said the new facility will be responsible for co-ordinating and supporting world-leading research and technology. Through the identification and development of new technologies, the centre will pinpoint areas for increased investment to fund research. In addition, the research will de-risk new concepts in wing design and help deliver sustainable aviation by supporting the development of new technologies and more environmentally friendly aircraft.
Tom Williams, Airbus executive vice-president of programmes and UK national representative, said: ‘Cutting-edge innovation is what the UK does best and we are fully aligned with the government in our goal to keep the UK aerospace sector where it is — one of the largest and most competitive in the world. Government, as well as private sector investment, is key to this strategy, and this initiative is a great example of how the two can work together successfully to promote growth in the UK aerospace sector for years to come.’
Welcoming the announcement, Dean Gilmore, defence partner at PwC, added: ‘Leading edge engineering and aerospace technology is exactly what the government should be investing in if UK plc is to remain competitive in the global industry.
Creating value-adding engineering schemes that will assist the aerospace and manufacturing sectors in this country is a step in the right direction.
‘Aerodynamics is at the heart of all aviation programmes, including military, civil and unmanned vehicles. Maintaining cutting edge capabilities ensures we remain competitive in this global market whatever the direction it ultimately takes.’
The chancellor pledged to help Network Rail improve the Northern Hub by providing an additional £130m in funding.
The plan to extend electrification of the Transpennine route between Manchester and Sheffield, in addition to improving the lines between Manchester and Preston, and between Manchester and Blackpool, was welcomed by Network Rail.
‘Today’s announcement of further funding for the initial stages of the Northern Hub is a welcome show of confidence in rail, bringing benefits to passengers as well as driving economic growth,’ said David Higgins, Network Rail’s chief executive. ‘To realise the project’s total value of £4bn to the northern economy and to create between 20,000 and 30,000 new jobs, the final stages of funding will need to be supported in the rail budgets to be announced later this year.’
The government also plans to develop a National Roads Strategy, as well as to explore new ownership and financing models for the national roads network to drive up efficiency and leverage private investment.
Osborne also spoke of the need to confront the lack of airport capacity in the south east of England. ‘We cannot cut ourselves off from the fastest-growing cities in the world,’ he said.
Oil and gas
A package of measures to secure billions of pounds of additional investment in the UK Continental Shelf was announced also.
Osborne said: ‘I want to ensure we extract the greatest possible amount of oil and gas from our reserves in the North Sea. We are today introducing a major package of tax changes to achieve this. We will end the uncertainty over decommissioning tax relief that has hung over the industry for years by entering into a contractual approach.
‘We are also introducing new allowances, including a £3bn new field allowance for large and deep fields to open up west of Shetland, the last area of the basin left to be developed.’
The chancellor added that the government will be publishing a strategy for gas generation in the autumn and acknowledged that gas-fired electricity generation will continue to play a major role in UK energy supplies over the next decade and beyond.
Summing up, Stephen Tetlow, chief executive of the Institution of Mechanical Engineers, said in a statement: ‘With British manufacturing growing by less than one per cent in the past year, we are still sorely lacking a bold, ambitious industrial strategy to rebalance our economy. This Budget contains some helpful measures but it’s a vision we need, not this piecemeal approach. We’re hearing the right notes, but no tune.
‘Some measures announced today deserve to be welcomed. Patent and R&D tax credits will help our most innovative industries, investment in North Sea oil and gas will help our position as a world leader in deep-sea exploration and a UK Centre for Aerodynamics will help our world-class engineers design and commercialise the next generation of aircraft.’