What does the Spring Budget 2024 mean for the manufacturing sector?

The Chancellor’s budget focused on long-term investment intentions for the manufacturing sector. These include backing the UK’s high-growth industries by making £4.5 billion available for strategic manufacturing sectors over five years to 2030 and boosting local growth through the investment zones programme. This Spring Budget builds on measures taken in Spring Budget 2023, all pointing towards long-term investment.

Investment announcements included:

• Next steps on the £4.5 billion funding package announced at Autumn Statement 2023 to unlock investment in strategic manufacturing sectors – auto, aero, life sciences and clean energy.
• Further measures supporting the UK advanced manufacturing sector such as expanding Made Smarter Adoption.
• Confirming plans for the £50 million Apprenticeship Growth Sector pilot, which will boost funding for eligible providers delivering 13 high-value apprenticeship standards in advanced manufacturing, green and life sciences sectors.
• Up to a further £120 million for the Green Industries Growth Accelerator (GIGA), to support expansion of low carbon manufacturing supply chains across the UK.
• Through the Life Sciences Innovative Manufacturing Fund, the government is supporting over £430 million of company investment in high-value manufacturing and 1,100 jobs.
• The government is also announcing a new £7.4 million upskilling fund pilot that will help SMEs develop AI skills of the future, unlocking the new opportunities that AI brings.
• Earlier in the week, the Chancellor announced a significant investment package for the UK’s manufacturing sector. This further emphasises the government’s commitment to long-term investment in manufacturing.

Moore Kingston Smith comments

Class 1 National Insurance Contributions (NIC) being cut from 10% to 8% will mean a £9 billion a year reduction in tax collected. Ultimately, this cash will go back into employee pockets. Said pockets will also be grateful for another 12-month extension to the fuel duty freeze until 22 March 2025. Fuel costs are not being increased by 5p per litre.

Multinational manufacturing and distribution businesses with high-value internationally mobile individuals are likely to be affected by the new taxation of non-domiciled individuals. A higher tax burden on those individuals may make the UK less attractive, as they move to a more attractive place of residence.

With investment zones and Freeports, the government continues to try to incentivise businesses to invest in specific locations and the enhanced allowances may be particularly relevant to manufacturing and distribution businesses.

Investment zones will allow various tax reliefs within the specified investment zone tax sites and implement business rates retention within specified investment zone business rates retention sites. These tax reliefs are: enhanced capital allowance (ECA); enhanced structures and buildings allowance (ESBA); business rates relief; employer National Insurance Contributions (NICs) relief and Stamp Duty Land Tax (SDLT) relief between tax site designation and 30 September 2034. These reliefs are all subject to their own eligibility criteria. This measure will be effective between 2024-25 and 2033-34.

Freeport sites are to be extended. Freeport tax sites include: enhanced capital allowance (ECA); Structures and Buildings Allowance (SBA); Business Rates relief; Employer National Insurance Contributions (NICs) relief; and a Stamp Duty Land Tax (SDLT) relief which is being extended to 30 September 2031.

Additionally, some tariff changes since Autumn Statement 2023 will likely concern manufacturing and distribution companies. The Carbon Border Adjustment Mechanism is being introduced on 1 January 2027. This measure applies a charge to UK imports of relevant products to reflect the carbon embodied in those imports. This charge is comparable to the UK’s effective carbon price, a combination of the UK Emissions Trading Scheme (ETS) and the Carbon Price Support (CPS). This takes into account the allocation of free allowances under the UK ETS. The charge will also be adjusted to account for any effective carbon price liable on those goods before entering the UK. The tax base for this measure is the carbon (and carbon equivalent) content of relevant UK’s imports. These are aluminium, hydrogen, cement, fertiliser, ceramics, glass and iron and steel.

Although there was nothing more about it in the Budget, manufacturing businesses should be aware that the R&D schemes are merging in to one RDEC scheme from 1 April 2024.

To find out more you can view our full Spring Budget analysis here.