Spending review signals a new era for UK Manufacturing

Written by Sam Hawthorne – Account Executive 

As the government readies its new industrial strategy, June's spending review included the promise of a big spending boost, and has been broadly welcomed by the manufacturing industry.

In her speech, Chancellor Rachel Reeves pledged £4.5 billion of investment in munitions, to be built in factories in Glasgow, Glascoed, Stevenage and Radway Green. Meanwhile, more than £6 billion in funding will go to upgrade nuclear submarine production in Barrow, Derby and Sheffield.

There's also over £2.5 billion for a new Small Modular Reactor (SMR) programme, with Derby-based Rolls Royce the preferred partner.

"The commitment to the largest roll-out of nuclear power in half a century, alongside investment in building the nuclear workforce of tomorrow, is a vital step in preparing the UK for future shocks - whatever they may be, " says Graham Hoare, CEO of the Manufacturing Technology Centre (MTC).

Reeves highlighted the government's decision earlier this year to step in and rescue British Steel, and said the government would continue to invest in Scunthorpe’s long-term future and the future of steelworks across the country.

"And as we build our train and tram lines, our military hardware and our new power stations, that will mean orders for steel made in Britain," she said.

"In Sheffield Forgemasters, where we are investing in nuclear-grade steel, and in Port Talbot, where this spending review confirms the £500 million grant to Tata Steel."

Meanwhile, a new fund, the Local Innovation Partnerships Fund, will provide up to £500 million for research and innovation, focusing on local strengths such as semiconductor manufacturing in Wales.

The spending forms part of an overall £86 billion research budget which, says Joe Marshall, Chief Executive of the National Centre for Universities and Business (NCUB), will have profound economic, social, and cultural benefits for the UK. 

“The spending review shapes not only the scale of funding for research, innovation, and skills but also its strategic direction," he says. 

"We applaud the pledge to extend R&D impact across the whole UK — notably through the new Local Innovation Partnerships Fund in England and reforms following the Green Book Review." 

All in all, the spending review confirmed that the industrial strategy will see £3 billion in R&D and capital funding allocated to advanced manufacturing over the next four years, while R&D funding across all sectors will increase to £22.6 billion per year by 2029-30.

There was also the promise of £520 million for life sciences manufacturing over the next four years. 

"The High Value Manufacturing Catapult welcomes the 2025 spending review’s focus on research and development, advanced manufacturing, and innovation as key drivers of a successful UK economy," says Katherine Bennett, CEO of the High Value Manufacturing Catapult.

"From semiconductors to supercomputers, affordable housing to clean energy, the government has signalled a clear commitment to the technologies that will drive greater productivity in all regions of the UK."

Meanwhile the government is also consulting on plans to award a series of road, rail, hospital and school building contracts that may require those bidding to show they can create local opportunity and growth. 

Public bodies would have to give more weight to firms that can show they will boost British jobs and skills in their bids for major government projects, including transport investments, as well as school and hospital building schemes.

And these proposed changes would also form a central part of the upcoming industrial strategy. Delayed from earlier this year, and now expected later this month, it will include plans for advanced manufacturing, clean energy, defence and digital technologies.

The spending review also promised 'significant additional funding' for clean energy as part of the industrial strategy.

However, with UK firms paying as much as 50% more for energy than France or Germany, and four times more than the US and Canada, there are serious concerns within the manufacturing industry over whether the new strategy will do enough to help, beyond particularly energy-intensive sectors such as steel and ceramics.

"Industry needs a funded and joined-up long-term vision as a matter of urgency for stability and investment," warns Stephen Phipson, CEO of manufacturing trade body Make UK. 

"Critically, this must include bold measures to address the UK’s eye watering industrial energy costs and the skills crisis. If the government delivers on these two issues it would be genuinely game-changing for the competitiveness of, and growth prospects for, manufacturers and the economy."

With billions in government investment reshaping the UK’s industrial landscape, now is the time to ensure your manufacturing business is protected and future-ready.

Speak to one of our team today to find out more. Manufacturing general enquiry | Howden Insurance (UK) - Business & Corporate