Manufacturers give cautious welcome to recent Autumn budget

Written by Matt Parry – Manufacturing Account Executive. 

The government's autumn statement has been broadly welcomed by manufacturers, with moves to ease some of the problems the sector's been reporting.

In one much-called-for change, for example, it announced plans to cut electricity bills for 7,000 manufacturers by up to 25 per cent. The scheme, starting in April 2027, is targeted at high growth industries such as automotive and aerospace, along with foundational sectors in their supply chains, such as chemicals.  

High energy prices have been a major worry for manufacturers for some time, with 65 per cent of respondents in Make UK and PWC’s 2025 Executive survey saying that high energy costs reduce their ability to compete.

Meanwhile, 64 per cent of businesses told the latest business confidence survey from the Adam Smith Institute that high energy costs are a ‘major concern’.

"In recent years, our most promising innovators and industries have been hamstrung by some of the highest electricity prices in the G7 and poor access to finance. That’s been a drag anchor on growth. A drag anchor on innovation," admitted business and trade secretary Peter Kyle. 

"I have listened to business on both these issues and today we’re taking action. This is just the start, and in the months ahead I will be going further to address business concerns, reverse our industrial decline and make the UK the best place to start and scale a business."

Also announced was a new five-year, £4 billion plan for the government-owned British Business Bank to invest larger amounts in successful domestic scale-ups, helping them avoid looking overseas for finance. Over the next five years, the bank expects to support 180,000 UK businesses, help create 370,000 new jobs and add £68 billion of gross value to the UK economy.

Meanwhile, defence spending is set to increase, while there's backing for Rolls Royce's plans to build the UK first small module nuclear reactors (SMRs) and targeted investment in the semiconductors sector. There's also funding for advanced manufacturing in Northern Ireland and two AI growth zones in Wales, expected to create 8,000 jobs, as well as £14 million for low carbon technologies in Scotland.

Cara Haffey, leader of industry for industrials and services at PwC, says the moves come at a critical time.

"We welcome the government’s continued focus on playing to our industrial and sectoral strengths across our global, national, and regional manufacturing base and supply chain," she says. "Investment in advanced manufacturing and across regions is a positive step towards supporting economic and inclusive regional growth and delivering on the Industrial Strategy."

MakeUK, meanwhile, welcomed the decision to expand capital allowances for leased equipment and to increase investment in apprenticeships for SMEs. It's also happy with the regional funding for skills, business support and infrastructure, as well as the consultation on the business energy support scheme.

"On the downside, however, restricting tax relief on salary sacrifice and, a further increase in the National Living Wage mean that manufacturers are again facing greater barriers to successful recruitment and retention of skilled staff," said CEO Stephen Phipson. "The electric vehicle road tax will also potentially hinder their adoption and damage an automotive sector already facing a challenge to meet its EV targets."

The Institution of Engineering and Technology (IET), meanwhile, says it's pleased to see strong support for electric vehicles and free apprenticeships for under 25s in SMEs - which, it says, will help address critical skills gaps and bolster small businesses.

However, it says, while cuts to energy bills are to be welcomed, there should also have been help for those wishing to improve energy efficiency.

Other provisions in the budget include a 40 per cent first-year allowance (FYA) for new main-rate plant and machinery from next January, as well as a cut in the Writing-Down Allowance (WDA) from 18 per cent to 14 per cent from April 2026.

There's also a big expansion of Enterprise Management Incentive (EMI) schemes set for April next year, with the employee limit rising from 250 to 500, gross assets and total share value going up, and the option exercise period rising from 10 to 15 years. And SMEs should now be able to gain pre-approval from HMRC on R&D claims, streamlining the process and reducing uncertainty.

The budget coincided with new figures from S&P Global revealing that the UK's manufacturing sector recorded its first increase in activity since September 2024. The boost came thanks to improved sales to the domestic market, while the rate of contraction in new export business eased to a 12-month low, the firm said.

All in all, there's general approval of the budget from the manufacturing sector - although the optimism is cautious.

“Maintaining international advantage in innovation and technology is not a given - in fact the UK faces fierce competition globally," commented Dr Graham Herries, chair of the IET’s Policy Oversight Committee. 

"Although it benefits from a good basis of intellectual capability, the ecosystem must be right – including infrastructure, keeping down rising costs for businesses and ensuring the UK is an attractive place to invest."  

If your manufacturing business is assessing how the latest budget impacts your costs, investment plans or risk profile, our specialist manufacturing team at Howden can help you navigate the changes with confidence. Speak to us today for tailored support.