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News Analysis: Industry gives muted welcome to Budget

Responses to the 2011 Budget from across the engineering sector

When Chancellor of the Exchequer George Osborne announced the UK government's Budget on 23 March, he outlined a number of measures that affect engineering, manufacturing, energy, transport and education.

Investment for research and development, financial support for manufacturing firms, and the creation of 21 enterprise zones will all have a beneficial effect. An extra £100m of capital spending will go towards science and engineering facilities, and the first of a planned network of Technology and Innovation Centres was announced, dedicated to high-value manufacturing.

Engineering UK chief executive Paul Jackson particularly welcomes the announcements of new University Technical Colleges and Enterprise Zones which aim to encourage regeneration in deprived areas. These will "provide further opportunities to develop tomorrow's engineers," he says.

Craig Slater, director of engineering recruitment specialist Roevin, says that engineering "has emerged relatively unscathed from the austerity programme".

However, the Campaign for Science and Engineering (CaSE) warns that after the government confirmed a £1.4bn cut in capital spending on science last year, the UK risks falling behind competitors like China and Germany in the global high-tech stakes.

"Labs across the country are going to be struggling to make ends meet following the budget cuts announced last year," says CaSE director Imran Khan. "We have to use the UK's high-tech base to help overturn our nearly trillion-pound debt - the Chancellor should invest in science and engineering to the extent that our competitors are doing, or risk our economy lagging two steps behind."

A boost to the number of apprenticeships is welcomed by several engineering groups, who say they will help young people get experience and training, and help bridge the skills gap.

Khan agrees, saying properly supported apprenticeships were "incredibly important for the UK's engineering industries" and that there needs to be a "full dialogue with engineering and manufacturing industries to assess the skills they need, and how apprenticeships fit into that skills profile".

Transport

Railway funding included a go-ahead for the £85m Ordsall Chord scheme, linking Manchester's Victoria and Piccadilly stations as part of the Northern Hub programme. There is also a commitment to the Swindon to Kemble redoubling scheme.

Association of Train Operating Companies chief executive Michael Roberts says the rail investment "should help to ease notable bottlenecks, providing rail passengers with more and quicker services, and stimulating economic growth".

One announcement that has attracted a lot of attention is the decision to introduce £2bn in new taxes on the windfall profits of oil companies to fund a 1p-a-litre drop in fuel duty.

While consumers would benefit from the reduced fuel taxes, the increased tax on North Sea oil and gas "could be counterproductive, and will create uncertainty for future investment", says John Cridland, director general of CBI.

Oil and gas industry leaders warn the tax will affect operations and cause cutbacks, including job losses. Oil and Gas UK chief executive Malcolm Webb says the tax regime will decrease investment, increase imports and drive UK jobs to other areas of the world.

Green energy

The government's introduction of a carbon floor price - a minimum price for an emissions permit - has been met positively by energy companies keen to invest in green technologies and meet European climate change targets.

Set at an initial £16 per tonne of carbon dioxide, experts believe it will encourage investment in offshore wind farms, carbon capture and storage, nuclear build and low carbon electricity generation.

Martin Grant, managing director of Atkins' Energy business, calls the decision a "sensible market-driven solution to progressively drive the decarbonisation of the UK's power industry".

Green finance was also announced in the form of the Green Investment Bank, which will open a year ahead of schedule in 2012 and will support low-carbon infrastructure including renewable energy and clean technologies.

Many have expressed disappointment that the green bank will not be able to borrow until 2015, with Halcrow chief economist Andrew Price calling it a "major blow to green groups and those arguing for accelerated infrastructure investment".

Ian Godden, chairman of ADS, the trade organisation advancing the UK aerospace, defence, security and space industries, says it is "crucial" for the aerospace sector to access support from the new bank for the UK to "retain its position as number one in Europe and second only to the US globally in aerospace".

Science, space and technology

Research and development will be boosted by improvements to tax credits, and investor relief, with the SME scheme rate of relief on R&D activities for smaller businesses increased to 200 per cent from April and up to 225 per cent from next year.

The government also committed itself to simplifying relief schemes, while minimum expenditure rules have been removed, helping early stage technology companies.

Samantha Vanags, head of R&D at Grant Thornton, says: "This is a fantastic move. R&D provides a key platform for UK business and makes a major contribution to our competitiveness on the global stage. It is vital that this activity is encouraged."

However, proposals for a special low tax-rate on patent-derived income are criticised as "broadly irrelevant" to the ICT sector by Grant Thornton's head of technology Niki Dixon. "We called for an extension of the Chancellor's proposed 'Patent Box' regime to cover a wider range of intellectual property but the legislation remains limited to patent income," she says. "Very little of the IP generated in this sector is protected by patent."

New capital investment of £100m was announced for science facilities, with one beneficiary being the International Space Innovation Centre at Harwell.

Godden of ADS welcomes this, saying the UK space sector is an "unsung success story" supporting 70,000 and generating £7.5bn per year to the economy. The additional investment would help government and industry plans to grow this to £40bn per year by 2050.

Dixon added that the changes announced will "support the creation of new businesses and support the R&D that underpins the future of the sector in the UK".

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