Autumn Budget 2024 - Implications for the Manufacturing and Automotive Sector

8 November 2024

The Budget presented by Rachel Reeves, the first female Chancellor in UK history, can only be described as a complex budget in challenging times, but how will the announcements impact the UK’s Manufacturing and Automotive businesses?

See our in-depth breakdown of all the key Budget announcements.

What was announced in the Autumn Budget?

Increase in Employers’ National Insurance Contributions (NICs): The rate will rise from 13.8% to 15%.
Increase in National Minimum Wage (NMW): For those over 21, the NMW will increase to £12.21. The NMW will rise to £10 per hour for 18–20-year-olds.
Benefits-in-Kind (BIK) for Electric Cars: The benefits-in-kind advantage of electric cars over other cars is maintained for the period to 2030.
Additional Funding for the Automotive Sector: An extra £2 billion has been allocated to support the UK’s automotive sector over a five-year period.
Research & Development (R&D) Funding for Aerospace: £975 million will be committed over five years to R&D in the aerospace sector.
Other Key Points:
- Fuel Duty Freeze: Fuel duty will remain frozen, providing relief for drivers and manufacturers.
- Road Repair Funding: An additional £500 million has been pledged to tackle the pothole crisis.
- Full expensing: to continue as before.
- Large corporate: refinements to legislationto support the implementation of Pillar 2.

What do these changes mean for the Manufacturing and Automotive sector?

The recent budget, unveiled during a period of economic uncertainty, carries a strong theme of ‘Invest, Invest, Invest!’. The Chancellor has committed billions of pounds in additional investments over the next five years, particularly targeting the automotive and manufacturing sector. This substantial financial boost is certainly a welcome move.

However, the budget also introduces significant challenges. Employers’ NICs will rise from April 2025 with the income threshold dropping from £9,100 to £5,000 per year. This change also affects Class 1A rates for workplace benefits, such as company cars, potentially increasing employment costs for manufacturing businesses striving to attract and retain top talent. Coupled with the increase in the NMW, these changes make hiring the right staff more critical than ever. The higher costs could impact profitability, thereby reducing the corporation tax bill at the end of the period. These financial pressures might drive companies to invest more in R&D, technological automation, and upskilling their workforce, alongside making strategic capital investment decisions – this is the positive outcome that the Chancellor will be hoping for!

Embracing Tax Incentives and Strategic Investments

On a brighter note, the Chancellor has given a significant boost to manufacturing sectors with substantial long-term investments. Key highlights include:

£975 million for the aerospace sector.
£2 billion for the automotive sector to support the electric vehicle (EV) industry.
£520 million for life sciences manufacturing.
£6.1 billion in funding for engineering, biotechnology, and medical science sectors.

The Chancellor has extended the company car tax bands until 2030. Fully electric vehicles will continue to benefit from low BIK rates, with only incremental increases. Additionally, to address one of the major barriers to EV adoption, public charging infrastructure, the Chancellor has pledged an additional £200 million. This funding will support local authorities in installing on-street chargers, which could significantly boost EV uptake among those without access to off-street parking.

The automotive and manufacturing sectors have long benefited from tax incentives for EVs, and this trend is set to continue with the extension of these incentives until 2030. The £2 billion investment in the automotive sector, coupled with the continued incentives for fully electric cars, is expected to drive expansion and development within this industry.

Additionally, the government has committed to protecting £20 billion in funding for R&D, recognising it as a “crucial national asset” for long-term economic growth. This consistent approach is vital for the continuity and success of breakthrough technological projects, ensuring that innovation remains a priority now and in the future.

Other key Budget highlights: Fuel Duty Freeze, Road Repair Funding, Full expensing and Pillar 2

Fuel duty has been frozen at 57.95 pence per litre since 2011, with a 5 pence-per-litre discount introduced in 2022, bringing it down to 52.95 pence. The Chancellor has confirmed that this rate will remain frozen for another 12 months, despite rumours of an increase. This freeze represents an average annual saving of £59 for drivers. For many automotive and manufacturing companies that rely on cars for employee commutes and business operations, any increase in fuel prices would have been unwelcome.

In addition to the fuel duty freeze, the government has pledged an additional £500 million to repair roads next year. This is particularly good news for companies that depend on well-maintained roads to ensure efficient supply and delivery models.

Furthermore, full expensing on qualifying investments is anticipated to remain in place until the end of the current parliament. Additionally, the £1 million Annual Investment Allowance (AIA), writing down allowances, and Structures and Buildings Allowances (SBA) will remain unchanged. This stability facilitates long-term planning for companies in these sectors while continuing to provide the annual benefits of short-term investments. Extended full expensing would support the transition to Net Zero and enable fresh investments in newer and more efficient equipment.

For large corporates in this sector, there was further news underscoring the need to prepare for Pillar 2 for those within scope. The Chancellor confirmed the government’s plans to implement Pillar 2 with legislation as expected. We encourage all companies in this sector that will be in scope from FY24 or in the future to consider Pillar 2 in detail going forward.

Overall, the budget sends a clear message: it is time to invest and innovate for a sustainable and prosperous future.