The 2024 Budget, presented by Labour’s new Chancellor, marks a significant pivot in fiscal policy, prioritising public service investment alongside notable tax changes. The Chancellor’s announcements—heralding the end of a 14-year gap since a Labour Budget—delivered a range of implications that could reshape the landscape for UK manufacturing. As a manufacturing and technology trade association, we, at the MTA, aim to break down how these measures may impact our members and their strategic operations.
Employer National Insurance Hike and Rising Employment Costs
One of the most pressing concerns for manufacturers in this budget is the rise in Employer National Insurance Contributions (NIC) from 13.8% to 15%, coupled with reduced payment thresholds. This increase arrives amid other rising employment costs, including a confirmed hike in the National Living Wage, which will increase to £12.21, a 6.7% rise
Stephen Phipson, Chief Executive of Make UK, highlighted the challenge this will pose, especially for small and medium-sized enterprises (SMEs). “Raising Employer National Insurance contributions and the surprising change in thresholds will be challenging for many businesses,” said Phipson. This cumulative impact may curtail workforce growth and investment, adding to a complex cost structure that could influence recruitment decisions.
Verity Davidge, Make UK’s Director of Policy, further emphasised the impact, noting that “the rising costs will inevitably lead to job losses,” as the budget compounds existing pressures from the National Living Wage, apprenticeship levy, and other employment-related policies.
Commitment to an Industrial Strategy
A long-term Industrial Strategy has been championed as a central element of this budget, with funding promised across key sectors, including aerospace, automotive, and life sciences. Make UK’s Phipson praised the commitment, stating, “The UK has long been an outlier in not having an industrial strategy at the heart of its economy…This commitment will deliver growth, investment, and high-quality jobs.”
Sector-specific funding includes £1bn for aerospace, £2bn for automotive, particularly supporting the EV transition, and £500m for life sciences. This strategic commitment signals promising support for a manufacturing sector that plays a vital role in the UK’s economic resilience.
Corporate Tax Roadmap: Investment Certainty
Another cornerstone of the budget was the Corporate Tax Roadmap, which promises stability in corporation tax policy and maintains full expensing and the Annual Investment Allowance through this parliament. Fhaheen Khan, Senior Economist at Make UK, noted, “Certainty and predictability are the bedrock on which investment decisions are made.” By locking in the current tax treatments for R&D and productivity-boosting projects, the government is bolstering the foundation for long-term growth.
Support for Digital Transformation with Made Smarter
The government also committed to continued funding for the Made Smarter programme, a digitalisation initiative that has supported smaller manufacturers in adopting new technologies. As Nina Gryf, Make UK’s Digitalisation Lead, highlighted, “Without Made Smarter, thousands of SMEs would have struggled to take initial steps toward automation.” For MTA members, this continuity ensures ongoing support for digital transformation initiatives.
Additional Changes and Future Expectations
While the budget included notable support for the NHS and additional funding for Skills England, concerns were raised about the relatively limited increase for Further Education (FE) funding and the absence of immediate changes to the Apprenticeship Levy. Additional support for manufacturing and vocational training is anticipated in the Spring Spending Review, which should flesh out the promised direct funding for manufacturing within the Industrial Strategy framework.
The Chancellor also announced relaxed borrowing rules, a move that may provide the government with greater flexibility to finance investments. This shift has garnered mixed reactions, but many in the manufacturing sector view it as a necessary measure to overcome the perceived short-sightedness in the Treasury’s approach to investment.
Conclusion
The 2024 Budget presents a mixed picture for the UK manufacturing sector. While rising employment costs and tax changes may strain operations, the government’s commitment to an Industrial Strategy, digitalisation funding, and tax stability offer grounds for cautious optimism. By addressing some of the core needs of the manufacturing sector, this budget aims to lay the groundwork for long-term growth, but the journey will require vigilance and adaptability as MTA members navigate the evolving landscape.
For our members, the MTA will continue to engage with policymakers, offering insights into how these changes affect our industry and ensuring that the government recognises manufacturing’s critical role in the UK economy.
