Yesterday, Chancellor Rachel Reeves announced the government’s Spending Review which outlined how much day-to-day funding government departments will get over the next three years, until 2029. It also covered the investment budget over the next four years, until the end of 2030.
As expected the defence sector and science and technology received major boosts as the Chancellor promised to “renew Britain”. Reaction from the manufacturing sector was mostly positive, but carried the not insignificant caveat that manufacturing businesses also have one eye on the launch of the Industrial Strategy, expected before the end of the month.
Kevin Craven, CEO of ADS Group, the UK trade association advancing leadership in aerospace, defence, security and space, said: “Health, security and the economy were chief among the topics outlined in today’s Spending Review, a welcome sentiment at a time of intense turmoil both at home and abroad. Commitments to defence spending plans are encouraging, but the constraints on the public purse are very clear.
“Striking the right balance is not an easy task, and we commend the expansion of the National Security Strategic Investment Fund and the Advanced Research and Invention Agency (ARIA), as well as significant investments in artificial intelligence (AI), in addition to a major boost to the British Business Bank. Within that, it is clear that the government has adopted a whole-UK approach, a welcome boost for businesses throughout the regions that are vital to UK prosperity. For our entrepreneurial and innovative sectors, a renewed vigour in the government’s attitude towards funding the Department for Science, Innovation and Technology is critical.
“With that said, it is clear that the picture is not as bright for unprotected departments. We now look ahead to the government’s Industrial Strategy for clarity on how it will support our world-leading sectors (we are quite positive though!) and hope that the Autumn Budget will maintain a competitive UK business environment.”
Commenting on the Spending Review, Stephen Phipson, Chief Executive of Make UK, the manufacturers’ organisation added: “Industry will view this statement through the prism of a delicate balancing act the Chancellor is having to perform in the light of tight public finances, a difficult economic environment and, the need to maintain fiscal credibility. Within that framework there is a welcome boost for defence, science and technology and, investment in local transport outside London and the South East which is vital if we are to boost growth in the regions where manufacturers are such a crucial part of the economy.
“However, all eyes will now turn to the forthcoming Industrial Strategy where there is great need and expectation. Industry needs a funded and joined up long term vision as a matter of urgency for stability and investment. Critically this must include bold measures to address the UK’s eye watering industrial energy costs and the skills crisis. If the government delivers on these two issues it would be genuinely game changing for the competitiveness of, and growth prospects for, manufacturers and the economy.”
Mike Hawes, SMMT Chief Executive, added: “The automotive industry recognises the pressure on the public purse and the need to divert funding to defence and growth. Automotive can deliver that growth but it depends on both competitive conditions and consumer confidence. Some support for EVs has been made available, but more substantive measures to incentivise private consumer demand are still needed if world leading targets are to be met. Government has already made great efforts to support a critical industry facing significant geopolitical challenges but without market-making interventions, that world-leading pace of transition may need to be reviewed.”
“The Chancellor’s welcome commitment to invest £113bn in capital projects across energy, infrastructure, transport and housing will create tens of thousands more jobs in engineering and technology across the UK, over the current Parliament and beyond,” continued Dr Hilary Leevers, Chief Executive of EngineeringUK.
“With this investment will come an increasing demand for skilled engineers and technologists, now and into the future. It is therefore vital that the government also invests in the education and skills system to support these sectors. The Treasury’s commitment to increase funding for apprenticeships and training to reach an extra £1.2bn per annum by 2029 includes support for high-quality training for over 1.3 million 16- to 19-year-olds. These efforts are very promising, but must be focused into areas of workforce need.
“To future proof growth, the government needs to break down barriers for young people from all backgrounds to access engineering and technology careers. The Chancellor clearly recognises the impact of socioeconomic status on opportunity but the need to improve the progression of women into engineering and technology continues to be overlooked, with women making up just 16.9% of that workforce. The forthcoming Industrial Strategy sector workforce plans must not only recognise the importance of early-stage interventions in schools but also drive more investment in STEM education and skills, supporting teachers to bring engineering and technology alive for all their students.
“While the real-terms increase in the Department for Education’s (DfE) expenditure up to 2029 is welcome, recent cuts to the Strategic Priorities Grant, Apprenticeship Support and Knowledge (ASK) programme, and Continuous Professional Development funding for science teachers will inevitably damage the STEM skills pipeline. It is imperative that DfE and Skills England focus on expanding entry routes into the priority sectors for young people and work with employers to address critical skills gaps.”
Dr Graham Hoare OBE, CEO of the Manufacturing Technology Centre (MTC) added: “The Chancellor’s statement is a welcome recognition that “energy security is national security.” The commitment to the largest rollout of nuclear power in half a century, alongside investment in building the nuclear workforce of tomorrow, is a vital step in preparing the UK for the future.
“The announcement of over £3bn in R&D and capital funding for advanced manufacturing over the next four years is particularly significant. This has the potential to unlock further investment across the UK and strengthen the foundations of the country’s industrial base to drive innovation, resilience, and long-term economic growth. These are areas where the MTC is proud to play a leading role and we look forward to working with government and industry to turn this ambition into action.”
The Spending Review also included a three per cent per year increase for health and the NHS. As such, the pharmaceutical industry called for greater focus to be put on investing in those areas of health spending that have the strongest evidence for both value for money and for directly improving patient outcomes.
Richard Torbett, Chief Executive of the Association of the British Pharmaceutical Industry (ABPI), said: “Despite tight constraints, the government has rightly recognised that sustained investment is needed to fix the NHS and deliver the care patients deserve. The key question is how this will be spent – and whether it will be used to improve patients’ outcomes.
“Over the past decade, accounting for inflation, the NHS budget has grown by a third in real terms (33%), while investment in the most rigorously cost-benefit tested part of health spending, investment in the medicines needed to treat people, has fallen from around 11% to 9% of the total health budget.
“The NHS must seize this opportunity to invest in the proven technologies and innovations that will support its reform agenda and improve patient outcomes. This means making sure patients can access the treatments they need and readying the system to roll out the new medicines that can prevent ill health and improve the lives of many more.”
Duncan Lugton, Head of Policy and Impact at IChemE, the Institution of Chemical Engineers, a global professional body for chemical, biochemical and process engineers said: “We welcome the emphasis on investment in clean energy in today’s Spending Review – this is a vital topic for individuals, companies and the planet. We eagerly await details of the Government’s plans to address the high costs of energy faced by British businesses, as these costs make it harder for companies to grow or be competitive. We hope that the forthcoming industrial strategy will see the Government set out their plans in this area.
“The science and technology spending announcements in today’s review are welcome, but turning these commitments into real industrial growth and job creation depends on addressing the UK’s longstanding challenges in scaling up scientific innovation.
“The UK holds deep research expertise, particularly in areas like engineering biology and clean technologies, but faces persistent barriers when it comes to moving laboratory breakthroughs into industrial-scale applications. The limitations around access to pilot-scale facilities, the skills gap in commercialisation, and the tendency for talent and technologies to scale elsewhere – such as in the US or mainland Europe – remain critical issues that government policy must target if the UK is to lead in these sectors.
“Investment in infrastructure, such as regional innovation centres, combined with incentives like tax relief for startups and applied research funding, could make the UK a globally competitive location for scaling up new technologies. This will be crucial for areas such as clean hydrogen, carbon capture and storage, and sustainable manufacturing, all of which require significant engineering input to deliver at scale.
“Moreover, the spending review must translate into support for developing the next generation of engineers and innovators. Training reforms, including embedding entrepreneurial and industrial skills into STEM curricula and fostering stronger ties between academia and industry, are essential. Initiatives like the ‘Ready for Industry’ programme demonstrate what’s possible, but wider adoption is needed.
“Without these systemic changes – infrastructure and skills development – there is a risk that scientific advances sparked in the UK will continue to be commercialised overseas, missing an opportunity to build sustainable economic growth at home. We hope to see more on this in the forthcoming industrial strategy and associated sector plans.”
Kelly Becker, President, UK & Ireland, Belgium & Netherlands at Schneider Electric added: “Today’s funding announcements are a major boost for regional growth, transport and much needed STEM education and skills. Yet, the devil is in the detail – we need to see how the funding will be allocated and joined up with the government’s overarching policy plans for industrial growth and skills to truly understand their effectiveness.
“We particularly welcome the commitment to transport decarbonisation, including the infrastructure underpinning electric vehicles, and significant funding commitments to the energy transition and the AI Opportunities Action Plan. But with high energy costs stalling growth, industry needs support now. We need urgent and decisive action to accelerate decarbonisation and digitalisation. This will be critical to strengthening the UK’s industrial backbone and boosting competitiveness – and it’s possible with policy that incentivises the widespread adoption of existing technologies that can create energy efficiencies.
“In a competitive international environment, the forthcoming Industrial Strategy must provide UK businesses with a clear roadmap for public-private cooperation, targeted incentives and solutions to industry-wide challenges, especially energy costs and skills. This will be critical to securing the UK’s industrial future.”
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