Reaction to the Budget
The Autumn Budget and spending review contained very few surprises, given that a number of measures were announced in advance: a rise in the minimum wage, an end to the public sector pay freeze, reducing the Universal Credit taper.
More details of the government's long term ambitions were barely mentioned, nor was there much mention of flagship programmes such as Freeports while net zero ambitions and the levelling up agenda were often repeated mantras.
James Wood-Robertson, partner and head of Shoosmiths’ energy & infrastructure sector group welcomes the headline announcement that England's city regions will receive £6.9bn to spend on train, tram, bus, and cycle projects – £1.07bn for Greater Manchester, £1.05bn for the West Midlands and £830m for West Yorkshire. However, James points out that, out of the figure of £6.9bn, only £1.5bn is additional ‘new’ spending because the government is including the £4.2bn promised in 2019 alongside funding for buses announced by the prime minister last year. He comments:
“The lack of details on investment in renewable energy (nothing on hydrogen for example) was disappointing and also surprising given the timing of the Autumn Budget with COP26, although the chancellor was keen to mention the recent successful launch of green gilts and the UK Investment Bank’s first major investment of £107m in offshore wind in Teesside. Previous announcements and plans suggest that the government is committed to its decarbonisation targets but also expects the private sector to do much of the heavy lifting to achieve those goals.”
Sam Henegan, associate and future mobility lead at Shoosmiths, said:
“For two consecutive years, the government has reduced the amount of grant funding an individual can obtain against the cost of a new electric vehicle – despite price being one of the biggest barriers to electric vehicles uptake, which are usually more expensive than the closest petrol or diesel alternative. By not addressing this in today’s Autumn Budget, progress will continue to be sluggish in the switch to electrical vehicles.”
“The government must consider expanding the grant scheme to second-hand electric vehicles, where funding could have a greater impact on a consumer’s ability to purchase. This approach could go some way to creating a greater equality of opportunity for lower-income households to switch to electric vehicles – pushing up their adoption and supporting the UK’s transition to net zero.”
Sam also points out that the new £1.4bn Global Britain Investment Fund comes at a critical time for UK electric vehicle and battery production, which is at risk of falling behind other counties, with China already running away with the market. One Chinese company (CATL) already has 31.2% of the global market share for EV battery production.
Legally, there is a requirement as part of the Brexit deal that, by 2024, all electric vehicles exported from the UK to the EU must have batteries that each contain a minimum of 50% UK or EU sourced materials. Failure to meet that requirement will result in hefty export tariffs which could be a hammer blow to an industry yet to find its feet. Sam warns that:
“It is crucial that more electric vehicle and battery production facilities are built in the UK, with at least five Gigafactories needed to keep up with domestic production demand. This is not only an economic and legal necessity, but integral to the UK’s shift towards net zero.”
Michelle Craven Faulkner, partner with particular expertise in the rail sector as well as working with renewable energy companies, commented:
“Today’s announcements show that having a regional Mayor is key when it comes to being in the line for government investment. However, regional disparities remain. For example, the Midlands continues to be defined to largely exclude the East Midlands when it comes transport investment.
Despite the funding guarantees, transport investment is a fine line for the government considering the financial support already provided following COVID-19. Uncertainty remains, with no mention of HS2, an Integrated Rail Plan promised ‘soon’ and partial renationalisation is still the name of the game.”
“The scrapping of certain aviation levies on flights within the UK, which will inevitably move people away from high speed rail and on to planes, won’t help at a time when the rail industry is struggling to boost passenger numbers post-COVID. It’s timing, a week before COP26, is also odd. Surely we should be encouraging the use of the greenest form of long distance travel within the UK rather than the most polluting.”
Sarah Fairweather, head of aviation and legal director at Shoosmiths, picked up that issue, commenting:
“Lowering the rate of air passenger duty for domestic flights will provide UK airports with a key boost at a time when the travel industry is still in significant distress. It may, however, create a situation whereby people are encouraged to utilise domestic air travel over rail, which the government must consider and address in line with its environmental targets.”
Tony Randle, partner at Shoosmiths who heads Shoosmiths8 Connected Services – a suite of non-legal products designed to offer innovative solutions to meet client needs - said:
“Funding of £3 billion for a skills revolution is very welcome as increasingly law firms - and other professional services businesses more generally - will need to engage more non-legal staff to embrace tech within their businesses, particularly in the fields of AI and data analytics. This announcement will only help to build on a currently very limited resource pool, benefiting not only the individuals concerned but businesses more broadly.”
“And it’s time for Dragons’ Den-style angel investors being made available outside London. There is a lot of great innovation happening outside of London and clusters are forming to nurture and promote - such as the West Midlands proftech cluster, SuperTech. However, access to the initial funding required to get start-ups to a minimum viable product / proof of concept can be hard for them to find outside of London. It is to be hoped that this announcement will spark life into great ideas all around the UK.”
James Klein, partner and head of technology sector at Shoosmiths said:
“The £1.4bn business investment funding announced in 2021’s Autumn Budget, which will hand out grants to encourage international companies to invest in the UK's critical industries including life sciences and automotive, is welcome news to the technology sector. The £354m dedicated to support investment in life sciences manufacturing – increasing resilience for future pandemics – will not only provide on the ground support where and when it is needed, but also increase confidence for investors that the UK is a stable, well-prepared nation to invest in.”
“The encouragement of overseas investment will attract skilled workers to the UK in professional services including in science, finance and technology sectors. A talent network will be launched in the San Francisco Bay Area and Boston in the US in 2022 and at Bengaluru in India. These innovation hotspots will attract the best foreign talent to the UK’s industries. The network will work with UK businesses and institutions to pinpoint skills gaps and identify the particular skills needed before sourcing the talent from research institutions, universities and innovation hubs. This will ultimately help in boosting investment to UK businesses.”
Catherine Williams, head of the firm’s living sector, noted that the Chancellor’s statement was rather light on any announcements of immediate interest, but reflects that, in light of the stamp duty land tax giveaway the industry has benefitted from in the last 18 months, that was no surprise. Catherine comments:
“Plans to invest in delivering 180,000 green homes by developing brownfield sites will have the dual benefit of appeasing those concerned about the erosion of the green belt and pushing further urban regeneration in towns and cities. But will this announcement really address the fundamental reasons for the lack of housing supply? Not really. Does it consider specialist housing needs, such as the incredible demand for housing for the elderly? Again no. But there will be greener homes – Rishi Sunak is right on message ahead of COP26. We heard more (of the same) about the Residential Property Developer Tax which the market already knew was coming earlier this year. What was ‘news’ was the announcement of the rate of 4% on profits over £25m. In short, today’s Budget could have been seen as ‘no news is good news’ or, if you are a property tax reformer, another missed opportunity to sort out a flawed system.”
Victoria Federico, senior associate solicitor and head of education law at Shoosmiths, welcomed the announcement of a £2.6 billion funding pot for children and young people with special educational needs and disabilities (SEND). This pot is to fund 30,000 new places at schools, both mainstream and special, for children with SEND. The funding will also be used to ensure buildings are appropriate to provide education for children and young people with SEND; this may also include building new schools. Victoria commented:
“We know from our work with families that finding a suitable school, whether it be mainstream or special, is a real challenge – further compounded by many of these schools being full, with children often having to travel out of their area or in the worst cases, having to stay at home until a suitable school, with a place, can be identified. It is hoped that this new fund announced today will resolve this problem for some of the most vulnerable in our society. It will no doubt be welcomed by families, and schools, but we need to make sure the funding is put into the right places.”