Spring Budget 2024 - Automotive and manufacturing

What was announced?

• Additional £270m investment on advanced manufacturing, including for innovative zero emission vehicles and clean air technologies.
• Full expensing for leased assets, for which draft legislation will follow, effective when fiscal conditions allow.
• Temporary fuel duty 5p reduction extended for another 5 months.
• Carbon tariff on imports of iron, steel, aluminium, ceramics and cement from 2027.

What does it mean for the sector?

Following the publication of its Advanced Manufacturing Plan in November 2023, the next steps regarding the £4.5 billion funding package to unlock investment in strategic manufacturing sectors (automotive, aerospace, life sciences and clean energy) were announced. £273 million of combined government and industry investment will be made available for cutting edge R&D projects, £70 million of which is ear marked for the automotive industry, illustrating the government’s commitment to the plan.

However, the budget did not go so far as introducing any fresh incentives to boost the adoption of electric vehicles, which may come as a disappointment to many.

The full expensing extension announced today provides much-desired support for leased plant and machinery assets. Industrial manufacturing, construction, and automotive industries in particular will reap these benefits directly with construction equipment and commercial vehicle manufacturers likely among the biggest winners. However, as its introduction was qualified with “as soon as it is affordable”, it remains to be seen how and when this benefit will be implemented.

Many businesses have absorbed the impact of increased import costs due to Brexit and are grappling with cost escalations through present economic conditions and compliance requirements. The introduction of carbon tariffs will only exacerbate the issue and may, over time, lead to further consolidation upstream and downstream in the manufacturing and automotive sectors. To sustain competitiveness and sustainability in their supply chain operations amidst dynamic market conditions, businesses must implement forward planning and carbon accounting mechanisms to mitigate risks and ensure compliance with EU regulations. Taking these steps will help businesses remain ahead of the curve and maintain a robust and healthy supply chain over the long term.

The extension of the 5p per litre cut in fuel duty might be expected to save the average car driver but it is unclear how this might impact the wider automotive industry. However, despite the freeze, drivers are still facing rising petrol prices.

In summary, while the Budget assisted car users by maintaining fuel duty freezes, it missed an opportunity to provide stronger support for electric vehicle sales and stimulate that market albeit the additional £730m specifically for automotive R&D projects is helpful.