Image: Jeremy Hunt
In an anticipated move, Chancellor Jeremy Hunt is poised to unveil a substantial £360 million funding injection for a range of manufacturing and research and development (R&D) projects in this week's Budget. Green industries are expected to emerge as significant beneficiaries of this strategic investment.
Amidst fervent speculation surrounding proposed tax cuts, the Treasury has confirmed the government's intention to allocate new funding towards various green technology initiatives. Notably significant is the earmarking of £200 million for joint public and private sector investment in zero-carbon aircraft technology development. Additionally, £73 million is slated for automotive technology projects to advance green innovation.
Furthermore, the Chancellor is expected to announce a £120 million increase to the Green Industries Growth Accelerator (GIGA), bringing the fund's total value to nearly £1.1 billion.
"We're sticking with our plan by backing the industries of the future with millions of pounds of investment to make the UK a world leader in manufacturing, securing the highly-skilled jobs of the future and delivering the long-term change our country needs to deliver a brighter future for Britain," Hunt said.
The funding package was also welcomed by Energy Security and Net Zero Secretary Claire Coutinho, who said: "We are backing our green industries with extra cash for the Green Industries Growth Accelerator - taking the total to more than £1bn. We have long been energy pioneers in advanced manufacturing, and this will allow us to carry on that great British tradition. While we have attracted £300bn in low carbon investment since 2010, with £24bn since September alone, this will help to unlock even more."
The funding package includes support for various sectors, including life sciences, with £92 million allocated for life science projects. Notably, more than £36 million will be awarded through competitions administered by the Advanced Propulsion Centre UK (APC) to accelerate the development of next-generation battery electric vehicles (EVs).
Moreover, significant investments are slated for developing zero-carbon aircraft engine technology and green aviation projects, with £40 million designated for the former, led by Cambridge-based Marshall Group and around £96 million allocated to the latter, led by Airbus.
The Treasury also provided insights into utilising funds for the Green Industries Growth Accelerator (GIGA), with approximately £390 million earmarked for expanding UK-based supply chains in electricity networks and offshore wind sectors. Around £390 million will also be dedicated to carbon capture, utilisation, storage, and hydrogen projects. The remaining £300 million will support projects to enable the UK to produce high-assay, low-enriched uranium (HALEU) fuel for advanced nuclear reactors.
Furthermore, the Treasury unveiled details of a two-year £50 million apprenticeship growth sector pilot, which will benefit sectors such as pipe welding, nuclear technology, and laboratory technicians.
Katherine Bennett, CEO of the High-Value Manufacturing Catapult, said the new funding announcements were "welcome news for our domestic life sciences, automotive and aerospace sectors and will support the growth of cross-sector low carbon supply chains across the UK".
"From developing technology for lower-carbon aircraft wings to supporting the expansion of UK-based supply chains in offshore wind, hydrogen and electrification, our network of innovation centres is helping drive industrial transformation across the UK," she added.
Dan McGrail, chief executive at trade body RenewableUK, also welcomed the new funding announcements. "The increase in GIGA funding to secure further private investment in green manufacturing jobs will enable us to supply more goods and services to projects here and aboard," he said. "It's also good to see that nearly £400m of that funding will be used specifically to grow our offshore wind supply chain and electricity networks."
However, McGrail added that the Chancellor should look to deliver a more comprehensive package of reforms and investment to seize the opportunity "to build on growing investor confidence in the UK and put us ahead of our global competitors in the escalating global race to build new clean energy projects and, crucially, to seize new manufacturing and supply chain opportunities".
The government has been under significant pressure from various stakeholders, including politicians, business associations, and environmental campaigners, to increase public investment in green initiatives. These calls aim to stimulate private sector involvement and steer the nation towards achieving its climate targets.
Recently, a letter endorsed by a bipartisan coalition of Parliamentarians urged Chancellor Jeremy Hunt to prioritise addressing the UK's ongoing underinvestment crisis in the upcoming Spring Budget. The letter emphasised the need for heightened public spending to advance the country's net-zero goals effectively.
Additionally, the Carbon Capture and Storage Association, Make UK, and the Global Infrastructure Investor Association have collectively contacted Hunt, urging him to affirm revenue support policies for the burgeoning carbon capture industry. These policies are crucial for facilitating investment decisions on the initial wave of projects in the UK and advancing the country's transition towards a low-carbon future.
The letter warned that without urgent action, the UK risked missing out on a significant investment opportunity and falling short of its legally binding emissions targets. "Without clarity on future revenue support now, given the six to seven-year lead-in times for new CO2 storage sites, it is very likely that there will not be sufficient development of those sites ready to meet the known industrial demand from 2030 onwards," the letter argued. "We need credible domestic deployment to secure a share of the global supply chain… The UK is well-placed to benefit from this global opportunity, but we are losing pace. Commitment is needed now to a revenue support framework matched to ambition, to attract the required private sector investment."
Moreover, the Treasury is deliberating on industry appeals to reduce VAT on new electric vehicles and align VAT on public EV charging points with the favourable five per cent rate enjoyed by home chargers. Additionally, there are discussions about bolstering funding for energy efficiency programs, among other proposals.
However, amidst the pre-budget briefing, indications suggest that the Chancellor's focus may primarily revolve around identifying new revenue streams to fulfil the desired tax cuts advocated by Conservative MPs in anticipation of the impending election.
In a newly released paper, environmental campaign group Greenpeace cautioned against the predominant emphasis on short-term fiscal priorities by both the government and the opposition. They warned that such an approach could perpetuate the underinvestment in green infrastructure, potentially hindering progress towards sustainable development goals.
"In the last six months, both major parties have reversed key climate commitments on the basis of cost," the group said. "In September, Rishi Sunak announced that the Conservative government would be 'rolling back' on key net zero commitments on the basis that the transition was costly to ordinary people, despite research suggesting net zero can both help grow the economy and reduce cost of living pressures via measures such as home insulation. Meanwhile, the Labour Party cut back their green spending pledge of £28bn a year, ostensibly because this clashed with their prioritisation of certain 'fiscal rules'.Â
"Failing to challenge austerity logic poses a significant risk to society at a time when economists from the LSE are warning that our public services and the wider economy are badly in need of investment, especially in the green economy."
The group also suggested that some of the tax reforms Hunt was reportedly considering fell short of the changes needed to increase investment in clean technologies. "Rumours include increasing the rate of air passenger duty for business class airfares, scaling back the 'non-dom' tax regime, extending the windfall tax on the profits of oil & gas companies, and scrapping tax breaks for second home-owners who rent out properties as holiday lets," the briefing paper stated. "While all of these measures would be welcome if they are actually delivered, they still fall significantly short from the scale of progressive tax reform needed to deliver a greener and fairer society, at home and abroad."
As the government navigates the intricate balance between fiscal priorities and environmental imperatives, the Budget announcement is poised to shape the trajectory of green investment and innovation in the UK.