For the first time, the Office for Budget Responsibility (OBR) has published not just five-year growth forecasts but also a comprehensive assessment of the growth impacts of the Government's policies over the next decade. “Today’s budget marks an end to short-termism,” said Chancellor Reeves.
Focus on employment and skills
To enhance employment prospects and address skills shortages, the Government is launching Skills England, which aims “to make work pay and tackle economic inactivity”.
Other initiatives include a £40 million investment in developing new apprenticeships, increasing funding for school and further education budgets to tackle the teacher recruitment crisis, and increasing the National Living Wage from £11.44 to £12.21 per hour starting in April 2025.
Beatrice Barleon, Head of Policy and Public Affairs, EngineeringUK, commented: “We look forward to continuing to support the Government to develop a new Growth and Skills Levy, ensuring an apprenticeships system that provides ample routes into engineering and technology careers for young people.
“The pledges of significant funding uplifts for school budgets and further education colleges will be key to addressing the teacher recruitment crisis, which is particularly acute in STEM subjects.
“To resolve the teacher workforce crisis in the long-term, this must be accompanied by a similar commitment to teacher retention, such as by reversing short-sighted cuts
to subject-specific CPD for STEM teachers.”
Tax increases and National Wealth Fund
In acknowledgement of the financial constraints facing the Government, Reeves confirmed anticipated tax increases exceeding £40 billion, stating, “Any Chancellor would face the same reality. We cannot undo 14 years of damage in one go, and so economic growth will be our mission throughout the duration of this Parliament”.
The Chancellor also announced a rise in employers’ National Insurance Contributions, with the threshold for payments shifting from £9,100 to £5,000.
To catalyse private funding and boost business investment – where the UK lags behind other G7 nations – the Government is establishing a National Wealth Fund. Reeves articulated the necessity of creating conditions conducive to investment, emphasising, “To rebuild our country, we need to increase investment.”
Following criticism regarding the impact of increased National Insurance responsibility on small businesses, the Chancellor revealed an increase in the employment allowance from £5,000 to £10,500, benefiting 865,000 employers who will not pay any National Insurance at all next year.
Nonetheless, the tax rise for businesses has raised concerns among some in the industry, with Bekki Phillips, Executive Director, In-Comm Training, saying: “It could certainly curtail some of our investment plans we were planning to make to inject even more new technology into the hands
of our learners.”
This sentiment was echoed by Mike Hawes, Chief Executive of the Society of Motor Manufacturers and Traders (SMMT), who urged: “Next year’s spending review must find resources to alleviate the strain on these companies.”
Investment in key sectors
The Industrial Strategy has identified eight high-growth sectors aimed at driving the green economy and enhancing the supply chains that support them.
The Government confirmed substantial multi-year funding commitments to spur research and development in regions like the East Midlands, South West, and Scotland.
This includes nearly £1 billion for the aerospace sector, over £2 billion for the automotive sector, particularly in electric vehicle manufacturing in the North East and West Midlands, and up to £520 million for life sciences and innovative manufacturing.
This has largely been welcomed by the industry, with Katherine Bennett CBE, CEO of High Value Manufacturing Catapult, commenting, “The Government is cementing the UK as an advanced manufacturing nation. From these foundations, we can build a dynamic and ambitious new industrial strategy.”
“The UK has long been an outlier in not having an industrial strategy at the heart of its economy,” added Stephen Phipson of Make UK.
“There can be no doubt that advanced manufacturing now has a critical part to play in driving growth across all
regions of the UK […] It will deliver growth, investment and high-quality jobs.”
“[The] Government now needs to move at pace to formalise the creation of the individual sector groups so that the formal strategy and more detailed plans can be brought forward.”
Additionally, the Government aims to position the UK as a clean energy superpower, announcing a significant investment in carbon capture and storage that is projected to create 4,000 jobs in Merseyside and Teeside, alongside funding for 11 new green hydrogen projects across the UK.
“We welcome moves to support new green hydrogen projects alongside previous commitments to deliver carbon capture and storage initiatives,” said Ennis.
“It’s vital that we ensure spending supports a whole-systems approach to energy as demand for electricity grows. This is particularly critical in scaling key sectors like technology and manufacturing, which are naturally energy intensive.
“To do this, industry and [the] Government must work together to establish smarter energy transmission and distribution.”
Electric vehicles
The Budget also announced that tax incentives for fully electric company car drivers will remain in place after 2028, as well as extending the Plug-in Van Grant.
However, while these initiatives have been hailed as a positive for the industry, they “alone cannot drive the growth in demand needed,” said Mike Hawes
of SMMT.
“With the sector challenged to deliver the world’s most ambitious EV transition targets, achievement of those targets is in serious doubt.
“There must be an urgent review of the market and regulation, else the cost will soon be felt in reduced UK investment, economic growth and jobs.”
A gap in the budget?
One area that was not specifically addressed by the Budget was artificial intelligence (AI). Peter Turner, COO of TeamViewer, pointed out the absence of substantial AI investment, emphasising the technology's potential for enhancing productivity across industries.
“New research from TeamViewer has found that three-quarters of UK decision-makers anticipate AI will drive one of the greatest productivity booms in a century.
“The Budget also didn’t place emphasis on security and regulatory clarity which is critically needed to address concerns highlighted by our research – 79 percent of tech respondents flagged AI security risks, particularly around data handling, as a significant issue.
“Support for secure AI adoption is essential for fostering responsible growth, empowering organisations to innovate confidently while managing risk.”
Conclusion
Overall, the Autumn Budget 2024 reflects a strategic shift towards long-term economic growth, with significant investments in manufacturing, clean energy, and skills development.
As the Government navigates a challenging financial landscape, the commitment to a modern Industrial Strategy promises to lay the groundwork for a more resilient and sustainable UK economy.
Stakeholders across sectors will be watching closely to see how these initiatives translate into tangible outcomes, particularly for SMEs and in relation to net zero commitments.