Blog: What does the Autumn Statement mean for maritime?
Maritime UK's Policy and Research Manager, Giorgio Buttironi, shares his analysis of the Autumn Statement, and what it means for the maritime sector.
Chancellor Jeremy Hunt set out the Autumn Statement 2022 against a challenging financial backdrop, with the cost-of-living crisis affecting a growing number of households and businesses across the country.
Hunt sought to reassure the markets by pledging to work in lockstep with the Bank of England and highlighting the importance to protect the UK’s financial credibility. Noting that ‘global factors’ such as the Russian invasion of Ukraine were the main drivers of inflation, Hunt promised to safeguard stability, promote economic growth, and protect public services.
- ·The UK economy entered into recession during Q3 of 2022 with GDP growth to contract by 1.4% in 2023, before rising again by 1.3% in 2024, 2.6% in 2025, 2.7% in 2026, and 2.2% in 2027%.
- The annual rate of inflation is forecast to reach 9.1% in 2022 before decreasing to 7.4% in 2023, and 0.6% in 2024; at the same time, the unemployment rate will increase to 4.9% in 2024.
- Government borrowing is expected to reach £177 billion in 2022/23 (7.1% of GDP) and £140 billion in 2023/24 (5.5% of GDP), before falling to £76.9 billion in 2025/26 (2.8% of GDP).
- National debt is expected to reach 101.9% of GDP in 2022/23 and 106.7% of GDP in 2023/24, before going back to 99.3% of GDP by 2027/28, while the current budget deficit is expected to go from 4.6% to 0.2% of GDP over the same period.
- The 45p income tax rate threshold will come down to £125,140 from April 2023, while the personal tax allowance will remain at £12,570 until April 2028 and the dividend allowance will decrease to £1,000 and £500 in 2023 and 2024.
- The tax-free capital gains allowance will similarly be reduced to £6,000 in April 2023 and £3,000 in April 2024, while electric vehicles will have to pay road tax from April 2025.
- With the main rate of corporation tax increasing to 25% from April 2023, the Government confirmed that previous changes to the capital allowance super deduction rules will no long be required.
- The Energy and Profits Levy on oil and gas producers will increase to 35%, while electricity generators will also face a temporary 45% levy from January 2023. The stamp duty cuts announced in September 2022 will remain in force until March 2025.
- Despite acknowledging that there will be pressures due to rising inflation, overall spending on public services will continue to rise over the next five years and departmental budgets will be protected in cash terms.
- Though the statement kept spending on defence and international aid will remain at their respective levels of 2% and 0.5% of GDP, Hunt recognised that the defence budget will need to increase in the near future.
- The Chancellor renewed the government’s commitment to tackling climate change by increasing energy independence and improving energy efficiency, pledging £6 billion to cut energy consumption of residential and industrial buildings by 15% before 2030.
- On infrastructure, Hunt recognised the importance of better connectivity between different regions across the UK to enhance economic growth and committed to keeping the Levelling Up fund and proceeding with HS2 and the Northern Powerhouse Rail.
- Speaking about innovation, the Chancellor recognised the prominent role of government spending on R&D and announced that this will increase to £20 billion a year by 2024/25.
- The Chancellor confirmed the Government’s commitment to the second round of the Levelling Up Fund, allocating at least £1.7 billion to local infrastructure projects by the end of 2022.
Maritime UK’s assessment
In setting out his agenda for economic growth, the Chancellor emphasized the importance of bringing about energy security, while also investing in new infrastructure and stimulating research and innovation.
Maritime UK’s ‘Programme for Government’ – published in October 2022 – sets out a clear roadmap for delivering against these three priorities, with the maritime sector ready and willing to play its role.
Offshore wind is a key part to increasing the UK’s energy security, rapidly gearing up to deliver increased capacity targets of 50GW by 2030 and 100GW by 2050. Indeed, the Chancellor himself paid tribute to the role of this energy resource in increasing the country’s energy independence, while emphasizing the need to focus on energy efficiency.
By virtue of its presence in coastal communities and its involvement throughout the lifecycle of offshore wind projects, the maritime sector is central to ensuring that offshore wind meets its expected goals. Maritime UK has put forward a number of specific recommendations for in its ‘Offshore Wind Plan’ to do just that, and we look forward to working with government to guide policy delivery. Proposed actions include:
- developing and maintaining a robust skills base of homegrown talent;
- encourage a more level playing field for UK manufacturers;
- rewarding development proposals with higher levels of UK content;
- giving higher weighting to low carbon footprint supply chains;
- treating vessels as national infrastructure;
- outlining a framework for ports to build green infrastructure more quickly.
Prior to delivering the Autumn Statement, the Government has signalled that it would reframe the ‘investment zones’ programme announced by the previous administration, opting instead to catalyse a limited number of the highest potential knowledge-intensive growth clusters, including through leveraging local research strengths. Similarly, the commitment to a comprehensive list of specific infrastructural improvements in the Growth Plan 2022 was replaced with a generic promise to accelerate delivery of projects across the Government’s infrastructure portfolio.
The maritime sector would like to see government go much further than that, building on the concept of ‘freeports’ to deliver coastal development frameworks that stimulate further investment by streamlining the planning process and unlocking funding for infrastructure in coastal areas, which have tended to suffer from greater economic deprivation in recent years. While Hunt’s commitment to greater transport connectivity through HS2 and the Northern Powerhouse Rail is a welcome step, the ‘investment zones’ programme needs to be much more ambitious, especially in terms of offering a competitive advantage for investment in coastal communities, which in turn contributes to delivering true levelling up in action by creating jobs that pay more than the national average and deliver the green skills needed to help decarbonise our economy.
Research and Innovation
Maritime UK welcomes the Chancellor’s decision to protect the R&D budget by adding a further £20 billion a year over the next two financial years, along with a 35% funding increase for the UK’s nine catapults for a total £1.6 billion investment. The Government hopes that this investment will allow the catapults to continue supporting innovation by stimulating additional private sector investment in R&D across the UK.
At the same time, there is room to go further. As set out in the Programme for Government, Maritime UK wants government to ensure that the uplift in UK Research and Innovation (UKRI) funding promised in the Autumn Statement 2021 is accessible the maritime businesses across the board, as well as increasing targeted maritime R&D funding and making investment in training and development of a maritime workforce a crucial part of innovation funding.
The Chancellor pledged an additional £2.3 billion to the schools’ budget within the Department for education over the coming two fiscal years (2023/24 and 2024/25), which will see average spending per pupil increase by approximately £1,000 over the same period compared with 2021/22.
The maritime sector believes that schools in coastal communities could use a share of this additional funding to work with the maritime sector in order to increase careers and outreach activity with pupils. Talking openly about educational pathways into maritime careers, either through apprenticeships, T-Levels or other qualifications, would go a long way to creating highly-skilled and well-paid jobs in regions that are both economically worse off compared to other areas of the country and currently lack work opportunities for their younger population.