Engineers and manufacturers ‘disappointed’ in Budget

Engineers have expressed disappointment at limitations to measures announced by the chancellor in today’s budget speech.

Extra infrastructure spending, tax breaks for shale gas exploration and energy-intensive industries and an increase in research and development (R&D) tax credits were among the announcements made to the House of Commons today.

While many of the tax-related measures were welcomed by engineering businesses, there was a general sense that more should have been done to invest in and support infrastructure.

Terry Scuoler, chief executive of manufacturers’ organisation EEF, said: ‘Today’s Statement contained some helpful measures on business taxation and some signs of re-prioritising spending for growth but it still feels like a job half done.

‘The chancellor had over £11bn of under-spending in his arsenal and should have done more to drive growth now, particularly through accelerating investment in infrastructure.’

This was echoed by business figures such as such Siemens UK managing director Juergen Maier, who said: ‘It was welcome news that borrowing appears under control, but with growth forecasts revised downwards, I was hoping for some more of the underspend to be invested in infrastructure projects.

‘The chancellor’s account of our infrastructure was seen through rose tinted spectacles and actually much more is needed to support energy and transport.’


As a key part of the budget, George Osborne announced an additional £3bn a year from 2015-16 for infrastructure spending and a total of £15bn over the next decade.

‘By investing in the economic arteries of this country we will get growth flowing to every part of it,’ he said.

In response, Duncan Symonds, UK head of infrastructure at engineering consultancy WSP said: ‘It’s disappointing that the chancellor’s recognition of infrastructure as the ‘economic arteries’ of this country wasn’t backed up by more detail on the ‘how’ and ‘when’ they will be unblocked.

‘£15bn extra funding is a welcome injection but it is realistically a small contribution to the £50bn needed by the Treasury’s own estimation, and most importantly, it will be futile if not backed by clear commitment to the programme, more detail on the delivery and support from the private market – so far not readily forthcoming.

‘There also needs to be recognition that while the big red tape projects are important, the smaller, less sexy projects, like flood defences, electrification and maintenance and repair programmes are equally important and in some cases can have more immediate impact on the economy, creating jobs and building asset value.’

The Institution of Civil Engineers (ICE) director general, Nick Baveystock, had a more positive outlook but with some caveats. ‘A £3bn a year boost for public infrastructure investment, despite it not being available until 2015, is a positive and welcome move, as are plans to boost Whitehall’s capability to deliver major infrastructure projects.

‘However as government itself acknowledges, 70 per cent of investment in UK infrastructure will come from private investors and owners and government must not lose sight of the scale of this challenge.

‘The drawn out process of the Electricity Market Reform, and the scaled down hopes for investment from sources such as pension funds, show there is an urgent need for government to improve its role as a facilitator of investment.

‘We would also like to see real, visible progress and fewer re-announcements on existing initiatives – such as the projects identified as receiving assistance under the infrastructure guarantees scheme and the level of funding available through the Pensions Investment Platform.’


The oil and gas industry benefited from the introduction of a ‘generous’ tax break for the early stage development of shale gas operations.

‘Shale gas is part of the future and we will make it happen,’ said Osborne, in a move likely to be welcomed by the traditional energy sector but the disappointment of those who favour renewables.

‘It is important for government not to see shale gas as the silver bullet many claim it is,’ said Dr Tim Fox, head of energy and environment at the Institution of Mechanical Engineers (IMechE). ‘Shale gas is unlikely to impact greatly on energy prices in the UK and we must avoid becoming hostage to volatile gas markets by not being over-reliant on gas.’

He added that it was disappointing that the government has yet to agree the “strike price” that will be paid to the operators of Britain’s proposed new nuclear plants.

For manufacturing there was a decision to exempt energy-intensive industries that involved metallurgical and mineralogical processes (the chancellor specifically mentioned ceramic manufacture) from the climate change levy added to commercial energy bills.

‘The government’s support for energy intensive industries will help ensure that UK firms don’t lose out to companies located in countries who have less focus on climate change mitigation through greenhouse gas reduction,’ said Fox.

Head of climate and environment policy at EEF Gareth Stace said: ‘These are welcome exemptions which will bring UK firms in sectors such as ceramics and steel into line with the same tax regime applicable to many of their EU competitors. It also sends a powerful signal that government is committed to these sectors operating on a level playing field and help boost investment in them.

‘Stronger safeguards for energy-intensive industries and, tax incentives for investment in indigenous gas resources are welcome and show the government is continuing its shift towards a more balanced energy policy.

‘But the job is far from done. A rapidly escalating unilateral carbon tax remains is a major threat to the competitiveness of manufacturing.’

Tax breaks

The chancellor also gave a tax break for companies who rely on innovation in the form of an increase of the above-the-line R&D to 10 per cent.

Two new bands were introduced to the company car tax (CCT) regime to encourage the greater take up and, in turn, manufacture of low-carbon vehicles.

And, in a move designed to benefit small and medium enterprises (SMEs), there was a reduction in company National Insurance payments of £2,000 per year.

EEF chief economist Lee Hopley said: ‘Another cut to corporation tax and enhancing the R&D tax credit will help push the UK  up the rankings as an investment location for large employers.

‘In particular the 10 per cent rate on the R&D tax credit should help to attract and grow innovation activity in the UK, which is vital for cementing our long term industrial competitiveness.’

Mike Baunton, interim chief executive of the Society of Motor Manufacturers and Traders (SMMT) gave an overall positive review.

He said: ‘The chancellor’s actions to improve R&D tax credits will help trigger extra business investment, and the change to the Company Car Tax rules for ultra-low emission vehicles will be welcomed by many in the UK automotive sector.

‘We look forward to further sector-specific measures which will come out later this year in the Automotive Sector Strategy, that will look deeper into protecting and enhancing the UK automotive supply chain, and boost innovation and skills within a competitive domestic business environment.’