Today was a big day for the new Chancellor, who has only been in post for a matter of weeks, and delivered a Budget that set out the Government’s plans to tackle Covid-19 with the NHS and business at the heart of his plans. Here are the top 10 takeaways from today’s #Budget2020 and what they mean for manufacturing.
1. The OBR expects an output boost from the budget
The Chancellor started his speech by saying that the UK economy was facing a slowdown even before the coronavirus outbreak hit the country but the Office for Budget Responsibility (OBR) has calculated the government's “large planned increase in public investment should boost potential output". The British economy will nevertheless grow at the slowest pace since the financial crisis this year, according to the government's spending watchdog. Overall, the OBR cut its 2020 growth forecast to 1.1%. This would be the weakest performance since 2009 and does not take into account any hit from the coronavirus.
2. The Bank of England cut interest rates from 0.75% to 0.25%
The Chancellor repeated the Bank of England’s earlier announcement to cut interest rates from 0.75% to 0.25%. This emergency action was taken to free up extra cash to increase lending to firms during uncertain times (with the Covid-19) outbreak and boost consumer spending to stimulate economic growth. Many manufacturers have raised concerns around cash flow since Covid-19 started impacting their businesses and their supply chains. Today’s cut to interest rates will go some way to steadying their nerves around cash flow challenges.
3. £30bn stimulus to support UK in Coronavirus
Following on from the BoE announcement, the Chancellor went on to announce a £30bn package overall to tackle Covid-19 including a Coronavirus Fund, this package was targeted at both the NHS and business with the measures declared as “temporary, timely and targeted”, adding that the NHS will get whatever resources it needs to fight coronavirus. The measures will help shore up confidence in the short term and industry will be reassured that the Government will do whatever it takes to keep the economy moving.
4. Big changes to Statutory Sick Pay for Covid-19
Importantly for employers, we got some clarity on plans for Statutory Sick Pay (SSP) for all Covid-19 related sickness. This includes SSP from day one and not day four, extending SSP to those who are self-isolating and no need for employees to go to their GP to get a sick note, but instead getting one from NHS 111. For small and medium sized employers, the SSP rebate will take the edge off their contractual sick-pay costs for absent workers, but at £94.25, SSP won’t go far, either for workers paying their bills, or employers who need to support their workers.
5. A win for manufacturers with news of business rate reforms
Chancellor Rishi Sunak did announce he will take the "exceptional step" of abolishing business rates for most British business in a bid to help the economy cope with the impact of coronavirus. The Chancellor said the Government has also decided to extend the 100% retail discount for small business. This will be a welcome announcement for small firms, with Make UK calling on Government earlier this week to reform archaic business rates.
6. Infrastructure spending boost confirmed
Infrastructure is vital for manufacturers to connect with customers, suppliers and staff. Chancellor Rishi Sunak has re-committed the Government to infrastructure spending and rail investment, including backing major projects like Midlands Rail Hub, HS2, Northern Powerhouse Rail and others as he promises £5bn to get gigabit-capable broadband into the hardest to reach places and £510m of new investment into the shared rural mobile phone network. He says that means 4G coverage will reach 95% of the country in the next five years. He also confirmed plans to spend £2.5bn filling in pot holes, which he says is enough to repair 50 million potholes.
7. A remit for the Low Pay Commission to increase the National Living Wage
The Chancellor set a remit for the Low Pay Commission to increase the National Living Wage to two-thirds of median earnings by 2024. This was somewhat expected with recent calls for evidence on the National Living Wage asking where next for the NLW after 2020. At current estimates this would see the National Living Wage at £10.50 by 2024.
Whilst manufactures strive to attract the best talent with wages to match, a single national living wage will increasingly have a regional impact, particularly in the North and Wales, and may lead to pay pressures for skilled and semi-skilled workers. Increases in the National Living Wage must always be subject to the ability of all businesses in all sectors to pay, particularly at a time when other pay-roll costs, such as pensions and the apprenticeship levy, are themselves dependent on wage levels.
8. £1.5bn for Further Education Colleges and funding for maths tutors
A much needed boost for our local further education colleges who were gifted £1.5bn in capital expenditure. This announcement is also timely as the roll out of T-levels continues. FE colleges are vital for educating and training the next generation of innovators, creators and makers.
Add to this was the announcement of more funding for maths teachers for 16-19 year olds which will generate a better equipped workforce with the STEM skills to address the skills shortage that manufacturers face.
9. The Health Surcharge to increase to £624
The NHS Surcharge which currently applies to non-EU nationals will increase to £624. Employers, who often pick up the bill for their employees, will need to factor in that from January 2021 this will also apply to EU nationals with the new immigration system kicking in. If the UK is to attract mobile international workers, under its future points based system, it needs to be globally competitive; with visa fees, settlement fees and skills charges to pay, the hike in the health surcharge, paid annually and per head, sends the wrong message that the UK is open to the workers it needs wherever they may come from.
10. Funding for carbon capture technology
The Chancellor announced £800m to support making carbon capture technology a reality. This is a critical component in helping manufacturers to #MakeItGreen. Engineers will also be required to make the pipes to capture the carbon highlighting the key roles manufacturers and their employees play in the green agenda. We look forward to seeing further details on this as it evolves.
It is no secret that for a number of years many of our members in have been fearful of spending cash due to political and economic uncertainties, but today’s budget is a clear sign that government is prepared to back manufacturers as they set out on a new global trading future.