Hammond delivers plan for productivity

The UK must build on its strengths in science and technology innovation to ensure the next generation of discoveries are made, developed and produced in Britain.

This is the view of Chancellor of the Exchequer Philip Hammond, who today delivered an Autumn Statement geared toward increasing productivity through improvements to infrastructure, boosting funding for R&D, and investing in transport.

“We choose in this Autumn Statement to prioritise additional high-value investment, specifically in infrastructure and innovation, that will directly contribute to raising Britain’s productivity,” Hammond told Parliament. “Raising productivity is essential for the high-wage, high-skill economy that will deliver higher living standards for working people.”

To bring these plans to fruition, the chancellor announced a £23bn National Productivity Investment Fund that will be spent on innovation and infrastructure over the next five years.

As announced by the PM Theresa May on Monday 21 November, 2016 at the CBI’s Annual Conference, a proportion of this fund will go toward the £2bn per year that will be spent on R&D by 2020/21.

As part of the National Productivity Investment Fund, new investment in England’s transport infrastructure will include £1.1bn invested in local transport networks, £220m to address traffic pinch points on strategic roads; and a £27m expressway to connect Cambridge and Oxford.

Further investment in transport will see £450m invested into trials of digital signalling on railways, plus £390m toward future transport technology, including driverless cars, renewable fuels and energy efficient transport.

This includes £100m investment in testing infrastructure for driverless cars; £150m to provide at least 550 new electric and hydrogen buses; and £80m to install more charging points for ultra-low emission vehicles, which will bring with it a 100 per cent first-year capital allowance for the installation of EV charging infrastructure.

“Our future transport, business and lifestyle needs will require world class digital infrastructure to underpin them. So my ambition is for the UK to be a world leader in 5G,” said Hammond. “That means a full-fibre network; a step-change in speed, security and reliability. So we will invest over £1bn in our digital infrastructure to catalyse private investment in fibre networks and to support 5G trials.”

Commenting on today’s Autumn Statement, Terry Scuoler, chief executive of EEF, said: “The Chancellor has… provided industry with a down payment on a modern industrial strategy. The boost to science and innovation is vital if we are to be at the forefront of the fourth industrial revolution.

“The Chancellor has also signalled a welcome recognition that our digital network and local roads are not fit for purpose and need major upgrade.

“From now on this should be the direction of travel for future statements and policy decisions, with government using the right levers to address productivity, regional growth and housing. A commitment to keep pushing on these priorities, whilst addressing past under-investment in infrastructure, will send out the right message to businesses here, and overseas, that Britain really is open for business post-Brexit.”

What measures should Philip Hammond have announced to have the most beneficial effect on the UK engineering sector? Let us know by taking part in our poll.

Budget briefs

£2.3bn billion for a new Housing Infrastructure Fund

The fund will be used for projects such as roads and water connections that will support the construction of up to 100,000 new homes in the areas where they are needed most. On top of that, £1.4bn will be used to provide 40,000 new affordable homes, including some for shared ownership and some for affordable rent. And another £1.7bn will be used to speed up the construction of new homes on public sector land.

£1bn to invest in full-fibre broadband and trials of 5G networks

Investment will support the private sector to roll out more full-fibre broadband by 2020-21. Funding will also support trials of 5G mobile communications. And from April 2017, the government will also provide a new 100 per cent business rates relief for new full-fibre infrastructure for a 5 year period.

More money for Scotland, Wales and Northern Ireland

Scotland, Wales and Northern Ireland will receive more money which can be spent on infrastructure projects, with each devolved administration deciding where this will be spent. This will be an increase of over £800m for the Scottish Government, over £400m for the Welsh Government and over £250m for the Northern Ireland Executive.

£2bn more per year in research and development funding by 2020-21

A major increase in research and development funding for universities and businesses with R&D projects to help the UK remain an attractive place for businesses to invest in innovative research. This will back scientific research and development of technologies such as robotics, artificial intelligence and industrial biotechnology.

R&D spending in the UK to reach 3 per cent of GDP by 2025

Fuel duty will remain frozen for a seventh yearIn 2017, fuel duty will remain frozen for the seventh successive year, saving drivers £130 a year on average.

Committing to cutting corporation tax to 17 per cent by 2020

The main rate of corporation tax has already been cut from 28 per cent in 2010 to 20 per cent, and will be cut again to 17 per cent by 2020, by far the lowest in the G20 and benefitting over one million businesses.

Source: HM Treasury

Reaction round-up

Dr Colin Brown, director of Engineering at IMEchE: “Today’s announcement of additional spending for transport, technology, energy and infrastructure, leaves one crucial part of the puzzle out: skills. All this funding, without the skilled people to deliver these projects, is like funding an empty shed. Government wants home-grown talent to deliver Research & Development, driverless cars and new energy infrastructure, but we just don’t have the sufficient engineers to deliver this. We have a shortage of key skills today and no clear plan on how to develop a skills pipeline for tomorrow. Government must face facts and outline a clear strategy to ensure the UK has the skills it needs for the economy to thrive.

Nick Roberts, Atkins’ UK and Europe chief executive officer: “The Chancellor has placed economic growth and quality of life at the heart of his infrastructure decisions. Being clear on these outcomes means that our most pressing needs around…roads, railways and digital networks feature at the top of the priority list, and the government can borrow a sensible amount of money to fund the improvements with a high degree of confidence that they will get a good return on their investments.

Dr Robert Parker, chief executive, Royal Society of Chemistry: "To deliver on its ambition for Britain to become ‘the global go-to place for scientists’ the government must match today's positive announcements about R&D funding with an equally clear signal to reduce the current uncertainty about EU researchers from outside the UK who are working here."

Kit Cox, CEO, Enate: “Today’s Autumn Statement is a step in the right direction for the UK. By announcing a £23bn National Productivity Investment Fund as well as confirming the additional £2bn investment fund into UK robotics and AI, announced by Theresa May earlier this week, it would seem like the new administration is not only alert to the potential economic, cultural and societal benefits of this industry, but actually doing something to encourage it. However, we must treat today’s announcement with cautious optimism. What is happening in the fields of AI and robotics is arguably the biggest and most exciting evolution of our time and simply throwing money at it will not unlock its potential. Hearing the government's desire to foster, develop and keep innovation here is welcome, but the government will only be considered visionary when it instigates a radical education overhaul as, right now, we don’t have enough people with the skills to deliver.”

Prof Alice Gast, president of Imperial College London: “This is good news for science. The chancellor has recognised that investing in research and innovation is the best way to raise productivity. We welcome the recognition of the potential impact of long-term investment in science and innovation and we will work to ensure that the whole country reaps the benefits of these investments. From robotics and artificial intelligence to biotechnology and advanced materials, the UK is well-placed to lead the next generation of scientific discovery and opportunities for growth.”

CaSE director, Dr Sarah Main: "This is truly exciting. The potential of what can be achieved with this investment is enormous. New research, new inventions, new businesses offering high quality jobs, and real progress in tackling major challenges and improving quality of life right across the UK. It is a real boost to see UK strength in science being championed by the Prime Minister and backed with what is the most significant investment in R&D I can remember. The funding principles that underpin our scientific strength are being upheld, with researchers leading the management of funds under their new body, UK Research and Innovation (UKRI). To stay cutting edge, it will be vital that balance is maintained between discovery-led and challenge-led programmes, but I am encouraged that these decisions will rest with UKRI."

Patricia Moore, UK head of infrastructure for Turner & Townsend: “We welcome the announcement that more funding is to be allocated to research and development, a driver of innovation to UK businesses. As infrastructure programmes increase in scale and become more complex, innovative management of programmes and advancement of project delivery through big data needs advancing at an unprecedented rate. The infrastructure sector must benefit from the announced R&D funding in the future and we look forward to working with our clients to develop their responses to this as well as seeing further details on the government’s industrial strategy.”

Andy Furlong, director, Institution of Chemical Engineers: “We should bear in mind that UK's national debt has grown to £1.7 trillion and it continues to grow at an eye watering rate of more than £5,000 every second. Significant economic growth is needed to address this challenge and it is essential that these spending decisions deliver tangible outputs. It is not immediately clear from the Autumn statement how these outputs will be measured.”

John Hicks, director and head of government & public at AECOM: “The missing component in today’s Autumn Statement was a new pipeline of transparent, viable projects for much heralded high-value investment, which the chancellor wants linked to productivity in order to secure public funding. Without this investors will not make the all-important final move. But the chancellor’s call for the National Infrastructure Commission to make recommendations on the UK’s future infrastructure needs could effectively hold up the publication of such a list. An intent to publicise falls short of being an actionable pipeline, which we hope would not delay much-needed private sector investment.”

Stephen Cooper, head of manufacturing at KPMG in the UK: “Today’s announcements…recognise the importance of digital infrastructure, which is fundamental to modern manufacturing. The promise of new fibre networks through the new £400m Digital Infrastructure Investment fund should help to support the industry’s future needs. As a key piece of the infrastructure puzzle, the delivery of this rollout needs to be clear, providing both reliability and resilience. Much needed investment in our transport and roads infrastructure is encouraging as is the doubling of support for our exporters, and continuing to prioritise these areas will help bring more confidence for life post-Brexit.”

Dave Croston, head of the advanced engineering group at Withers & Rogers: “Firms will be hoping that the government’s pledge to create a tax system that is ‘pro-innovation’ will deliver benefits sooner rather than later to help counter Brexit-related uncertainties.”