Chancellor Rachel Reeves made her inaugural budget speech on Wednesday, representing Labour's first fiscal statement in 14 years. Her extensive address emphasised economic growth and fiscal responsibility, introducing significant tax reforms and new approach for government borrowing.

The government's announcement regarding adjustments to fiscal rules today indicates a commitment to enhancing funding for large-scale projects, highlighting the crucial link between investment in infrastructure and economic growth. This shift could foster a more sustainable investment strategy, aligning the UK with other European nations. The implications are far-reaching, not only providing our industry with a steadier stream of projects but also ensuring that the new developments lead to improved societal outcomes. Here are the key updates to the UK's fiscal policy:

Increased Investment in Infrastructure

One of the central themes of this year’s budget is a renewed commitment to infrastructure investment. The budget unveiled several comprehensive infrastructure reforms, including the creation of the National Infrastructure and Service Transformation Authority (NISTA) aimed at enhancing project delivery. It also initiated a consultation on the National Planning Policy Framework (NPPF) to support the development of new housing and infrastructure. Among other key announcements were the introduction of Great British Energy, a new energy initiative, and the establishment of Skills England to focus on training. Additionally, adjustments to debt regulations were implemented to facilitate substantial investments in infrastructure, enabling the government to dedicate billions to upcoming projects.

Nearly £1 billion pledged for UK Aerospace

The UK Government has pledged nearly £1 billion in funding for the aerospace sector as part of its autumn budget. The Budget emphasised that "the UK’s science base is a crucial national asset" and committed to safeguarding overall government R&D investments, with a total of £20.4 billion earmarked for 2025-26. This allocation includes £13.9 billion designated for the Department for Science, Innovation and Technology (DSIT), which encompasses £6.1 billion for core research funding and £2.7 billion for participation in EU research programs and partnerships, along with costs associated with the Horizon Europe guarantee scheme. Core research funding supports initiatives through Research England, Research Councils, UKRI talent, UKRI international subscriptions, and National Academies funding.

Good news for HS2

Chancellor Rachel Reeves unveiled government funding for the tunnelling required to extend the High Speed 2 (HS2) project to Euston station. This ambitious plan includes a 7.2 km twin-bore tunnel that will link the new hub at Old Oak Common in west London to Euston in central London. This funding commitment comes in response to a review of financing and delivery processes following the previous administration's cancellation of HS2's northern extension from Birmingham to Manchester. Although the specific funding amount has not been confirmed, estimates from 2019 suggest it could be around £1 billion.

HS2 Ltd has expressed support for this announcement, highlighting the project's potential benefits for transportation and local economic development. Preparations for construction are already in progress, with logistics tunnels and vent shaft excavation underway, and a joint venture contractor poised to execute the work. Industry leaders are advocating for enhanced planning and collaboration to ensure the success of this crucial infrastructure project.

A Commitment to Safety, Education, and Housing

The Autumn Budget allocates significant funding to address critical infrastructure issues, including £1 billion for the removal of dangerous cladding in response to the Grenfell inquiry findings. It also commits £1.4 billion to rebuild 500 outdated state schools, with an additional £300 million annually for school maintenance to address urgent repair needs. Furthermore, £5 billion is earmarked for housing, and the government plans to hire hundreds of new planning officers to expedite the housebuilding process, aiming to enhance both safety and educational facilities while addressing the housing crisis.

A Bright Future for Green Energy

The Autumn Budget introduces a range of measures aimed at bolstering the UK's green energy transition and supporting the economy. The government will increase the windfall tax on North Sea oil and gas producers to 38% from 35%, extending the levy by an additional year. A significant multi-year investment in carbon capture and storage will accompany the launch of 11 new green hydrogen projects, marking them as some of the first commercial-scale initiatives globally. Additionally, the government reaffirmed its commitment to the National Wealth Fund and GB Energy, anticipating £100 billion in capital spending over the next five years. Finally, £2 billion will be allocated to the automotive sector to support the adoption of electric vehicles, further emphasising the shift toward sustainable energy solutions.

Conclusion

The Autumn Budget presents a complex mix of difficult choices but offers significant benefits for UK industry. It brings both opportunities and challenges for the engineering sector, with increased infrastructure investment, a focus on green technologies, and enhanced support for skills development and R&D. This budget lays the groundwork for potential growth and innovation, but engineering firms will need to be agile and proactive to fully leverage these opportunities. As we enter the next fiscal year, the engineering industry is poised to play a crucial role in the UK’s economic recovery and sustainability initiatives. By seizing the prospects outlined in the Autumn Budget, the sector can continue to adapt, innovate, and thrive in a rapidly changing landscape.