Spring Budget 2024: key announcements and industry reactions

Science and innovation serve as significant catalysts for economic development. This underpins the government's commitment to providing investment in research and development (R&D), including a £750 million package announced at the Autumn Statement. To optimise the impact of this investment, the flagship Faraday Discovery Fellowships and Green Future Fellowships will receive funding through endowments. Further announcements made will bolster the UK's strategic advantage, allocating £14 million to enhance the UK’s public sector research and innovation infrastructure, up to £100 million in support for future satellite communications, and £1.6 million towards advancing the quantum computing mission.

As a component of the Autumn Statement 2023 package, the government revealed reforms amounting to £280 million annually to streamline and enhance R&D tax reliefs, aiming to foster innovation within the UK. To enhance the efficacy of the R&D tax reliefs system, HMRC is set to create an expert advisory panel to assist in administering R&D reliefs.

During the Autumn Statement 2023, the government endorsed the recommendations presented in Professor Irene Tracey’s and Dr. Andrew Williamson’s independent review of university spin-outs. In a bid to augment commercialisation throughout the UK’s university sector, the government is actively advancing the implementation of the review's suggestions. Universities have been instructed to report on their spin-out policies by the end of May and consultations have commenced on the design of a new £20 million proof-of-concept fund. This fund is intended to aid universities and future founders in de-risking technology and on a pilot scheme to assist universities in establishing shared Technology Transfer Offices.

Advanced manufacturing

Outlined in the Advanced Manufacturing Plan of November 2023, the government has pledged to make the UK the premier global location for starting, expanding, and investing in a manufacturing business.

This investment encompasses over £2 billion designated for the automotive sector and £975 million for aerospace, with availability extending over five years from 2025. The government has also confirmed that the aerospace funding announced at the Autumn Statement 2023 will be channelled into the Aerospace Technology Institute (ATI) programme. This programme encompasses R&D support for small enterprises via the ATI SME competition. Moreover, the government will facilitate a smooth transition to the Auto2030 initiative, which targets manufacturing of zero-emission vehicles and their supply chains.

The Spring Budget further introduces additional initiatives to support the UK's advanced manufacturing sector, building upon the broader commitments made in the Autumn Statement 2023, such as the expansion of Made Smarter Adoption. This expansion includes the confirmation of plans for the £50 million Apprenticeship Growth Sector pilot. This pilot will enhance funding for providers offering 13 high-value apprenticeship standards in the fields of advanced manufacturing, green technologies, and life sciences.

Green industries

The UK has become the first major economy to reduce its emissions by half, achieving a 50% cut between 1990 and 2022, while simultaneously expanding its economy by 79%. Building on a range of initiatives unveiled at the Autumn Statement to bolster the UK's green industries, the government has announced an additional investment of up to £120 million in the Green Industries Growth Accelerator (GIGA). This funding aims to facilitate the expansion of low-carbon manufacturing supply chains throughout the UK. Of the total funding exceeding £1 billion, it is anticipated that up to £390 million will support the supply chains of offshore wind and electricity networks, with an equivalent sum allocated to the supply chains of Carbon Capture Utilisation and Storage (CCUS) and hydrogen.

The UK's civil nuclear programme plays a pivotal role in the government's strategy to ensure energy security and achieve a decarbonised power sector. Beyond the development of Hinkley Point C and Sizewell C, the government is investigating the potential for another large-scale reactor project. Great British Nuclear is conducting a competitive selection process for Small Modular Reactors (SMRs). The government is advancing to the next phase of the SMR initiative, with six companies invited to present their initial tender responses by June of this year. Acknowledging the critical importance of securing nuclear sites for the success of the nuclear programme, the government has finalised a £160 million agreement with Hitachi for the acquisition of the Wylfa site in Ynys Môn and the Oldbury-on-Severn site in South Gloucestershire, although no project decisions have been confirmed.

Digital technology and AI

The UK boasts Europe's premier tech ecosystem, with a valuation exceeding $1 trillion. The government has steadfastly supported the sector's promise, announcing more than £3.5 billion in public investment into the AI ecosystem since 2014. This includes over £1.5 billion in planned investment in computing power announced last year.

In the coming months, the government will detail the management of access to the UK's advanced public computing facilities. This initiative aims to ensure that both researchers and innovative businesses can obtain the computing resources required to develop leading-edge AI products. Furthermore, the AI Safety Institute (AISI) has achieved a significant milestone in its mission to influence the future of AI. It has recruited 30 of the globe's foremost AI safety experts to its Technical Research Unit and has conducted the world's inaugural evaluations of frontier AI models by a government, both pre- and post-release.

Additionally, the government is introducing a new £7.4 million upskilling fund pilot to assist SMEs in developing the AI skills needed for the future, tapping into the opportunities presented by AI. This initiative will be complemented by the soon-to-be-launched SME Digital Adoption Taskforce. The taskforce will explore optimal strategies for enhancing digital technology adoption among SMEs, aiming to elevate their productivity. Its efforts will augment those of the AI Opportunity Forum, which assembles leading companies to promote AI adoption within the private sector, thereby enhancing productivity, driving innovation, and stimulating growth across the economy.

Given the Alan Turing Institute's role as the UK's national institute for AI and data science, its contribution to economic and scientific progress, and its impact on millions through groundbreaking research, the government has announced an investment of up to £100 million in the Institute over the next five years.

Thoughts from industry

Lee Myall, CEO, of critical network infrastructure provider, Neos Networks, argues that the AI investment will be futile if we don't invest in upgrading the underlying telecoms networks to sufficiently handle the influx in traffic from AI: "AI investment will be important to the success of the UK’s digital economy, yet AI hinges on the backbone network infrastructure that facilitates data flow between core, edge data centres, and end users. While private-sector investments in FTTP continue to drive progress in gigabit-capable coverage in 2023, public-sector funding is having a limited impact. Initiatives like Project Gigabit are addressing rural connectivity gaps, but the UK still lags behind many other developed countries in the roll-out of gigabit-capable networks.

“To fully leverage AI's potential and propel technological advancement in the UK, more investment is needed in high-performance fibre infrastructure. The Government must work closely with network operators to address the size, location and quality of the underlying infrastructure that will support the influx of traffic generated by AI."

Phil Burr, Head of Product, Lumai said: “The UK has an incredible amount of deep tech expertise. With the right support, there is the potential that this talent can become the next Arm, NVIDIA or even Intel. There are amazing companies in the UK who are developing fundamental game-changing innovation in the field of AI and computing which could catapult the UK forward in AI.

“The UK’s Advanced Research and Invention Agency (ARIA) is a good start in providing support to the UK’s deep tech innovation. As a next step, we encourage the government to ramp up the breadth of programmes covered and commit to long term strategies to ensure that results of the innovation come to fruition.”

Stephanie Baxter, Head of Policy at the Institution of Engineering and Technology, said: “The Institution of Engineering and Technology welcomes [the] Spring Budget announcements on nuclear, apprenticeships, and R&D investment.

“Further developing the UK’s nuclear capacity, particularly in small modular reactor development will be critical to support the move towards net zero. However, this must be underpinned by a strong skills pipeline. That is why we welcome the further investment for apprenticeships in key growth sectors, including nuclear technicians and electrical power network engineers, which will address shortages in the sustainability and digital skills pipeline – key to sustainable, long-term economic growth.

“However, whilst increasing the number of apprentices will be crucial to fixing the skills pipeline in the long-term, there remain significant gaps in the existing workforce. That is why we were disappointed to see that, once again, calls to reform the Apprenticeship Levy by making it more flexible for employers to upskill and reskill existing employees, particularly with micro-credentials in new and emerging technologies like AI and digital twins, has been ignored.

“In order to maximise the potential of R&D investment, it must be accompanied by plans to upskill workers in the adoption of new technologies. For example, digital twin technology can reduce down-time for manufacturing and optimise processes, but currently only 23% of employers surveyed in 2023 said that the UK has skills in this area.

“This is particularly the case for SMEs, who have the most to gain but the least time and resource to invest in training. We were therefore pleased to see the government’s upskilling fund pilot to help SMEs develop AI skills and look forward to seeing further plans set out in the SME Digital Adoption Taskforce. Only by remaining agile will we plug skill gaps now and in the future.

“There is also clear recognition in this Budget about the role technology plays in improving productivity, especially in the NHS – where interoperability remains a significant hurdle. The application of engineering technologies to healthcare promises a revolution in the way we diagnose, monitor, and treat disease, and will empower healthy lives.”

Beatrice Barleon, Head of Policy & Public Affairs at EngineeringUK said: "We welcome the Government’s commitment to invest in crucial sectors, such as engineering and technology, and Small to Medium Sized Enterprises in the UK, including for example the Green Industries Growth Accelerator (GIGA). We also share the pride that the Chancellor clearly felt when talking about how the UK is becoming a leading force in the technology sector, comparing it to the Silicon Valley.

"However, given all this, we are extremely disappointed that there is no mention of the need to invest more and focus on skilling the future workforce. Without more skilled young people coming through the UK education system, UK businesses will struggle to grow and stay competitive compared to other countries.

"There is an acute STEM teacher shortage affecting young people’s STEM education and therefore their ability to pursue careers in these vital sectors, yet there was no mention of teachers and how the Government intends to support them. There was also a lack of focus on how crucial training routes, such as apprenticeships, will be enabled to grow into the future, and how this will be funded.

"We renew our ongoing call for the Government to develop a clear and properly funded STEM skills plan. This should include investment in careers outreach and education, apprenticeships for young people aged 16-19 and commitment to sustaining existing funding levels for STEM teacher professional development."

Professor Sir Jim McDonald GBE FREng FRSE, President of the Royal Academy of Engineering, says: “The government’s announced investment to accelerate late-stage R&D and support engineering and manufacturing projects across life sciences, automotive and aerospace sectors is welcome, as many of these technologies are pivotal for delivering healthcare and achieving the UK’s net zero and growth ambitions. The Green Future Fellowships delivered by the Academy will also be vital for achieving these ambitions and driving economic growth. The government’s ongoing investment in aerospace through the Aerospace Growth Partnership, the Aerospace Technology Initiative and Advanced Propulsion Centre has been successful for its long-term commitment beyond budget and political cycles, an approach that needs to be replicated across the research and innovation sectors.

“To maintain the UK’s place as a leading tech ecosystem, it’s important that the government move swiftly to implement the Mansion House reforms to support innovative companies to access the capital they need to scaleup domestically and we encourage the government to explore other sources of investment held in UK financial institutions.

“Continued investment in the UK’s AI sector, including through the Alan Turing Institute, is vital to support the development of emerging technologies and engineering that can help to address complex societal challenges. However, it’s crucial that this continued investment is delivered in a way that unlocks opportunities for innovation, skills development and economic success in all nations and regions across the UK, to ensure that advancements in AI engineering contribute to a more inclusive economy.”