Spring Budget 2021: Key Government Spending Plans

On 3rd March 2021, Chancellor Rishi Sunak delivered the UK Budget in the House of Commons, outlining the Government’s spending plans in the coming months and years.

As the nation prepares to tentatively ease COVID restrictions over the coming months, this budget announcement was one of the most eagerly anticipated for many years. Perhaps the main takeaway for businesses across the UK is the extension of the job retention scheme until the end of September. Mr. Sunak said the scheme would continue to help millions through the challenging months ahead.

Delivering the budget in Parliament Chancellor of the Exchequer Rishi Sunak said:

“This Budget meets the moment with a three-part plan to protect the jobs and livelihoods of the British people.

“First, we will continue doing whatever it takes to support the British people and businesses through this moment of crisis.

“Second, once we are on the way to recovery, we will need to begin fixing the public finances – and I want to be honest today about our plans to do that.

“And, third, in today’s Budget we begin the work of building our future economy.”

COVID-19

Predictably, the initial focus of the budget announcement was around the ongoing support for those areas of the economy worst-hit by the COVID-19 pandemic. As well as the extension to the furlough scheme, the Chancellor also announced an extra £1.65 billion cash injection to ensure the Covid-19 vaccination roll-out in England continues to be a success. Mr. Sunak also announced £28 million to increase the UK’s capacity for vaccine testing, support for clinical trials and improve the UK’s ability to rapidly acquire samples of new variants of COVID-19.

Protecting jobs and livelihoods

As part of Government efforts to support, protect and create jobs, the Chancellor announced increasing support with £126 million of new money to enable 40,000 more traineeships, and doubling the cash incentive to firms who take on an apprentice to a £3,000 payment per hire. Also announced was £7 million for a new “flexi-job” apprenticeship programme in England, that will enable apprentices to work with a number of employers in one sector.

To balance the need to raise revenue with the objective of having an internationally competitive tax system, the rate of Corporation Tax will increase to 25%, which will remain the lowest rate in the G7. In order to support the recovery, the increase will not take effect until 2023. Businesses with profits of £50,000 or less, around 70% of actively trading companies, will continue to be taxed at 19% and a taper above £50,000 will be introduced so that only businesses with profits greater than £250,000 will be taxed at the full 25% rate.

UK Infrastructure Bank

Mr. Sunak announced the formation of a new UK Infrastructure Bank to be based in Leeds. It will see an initial £12 billion in capital, with the aim of funding £40 billion worth of projects. Local Authorities will gain access to £4Bn in loans, which can be tailored for projects around transport, storage and renewable energy. Speaking ahead of the budget announcement, the Chancellor said:

“We are backing this bank with the finance it needs to deliver modern infrastructure fit for the 21st century and create jobs.

“This shows how serious we are about levelling up the country so that everybody can benefit from our future prosperity.”

The Chancellor also reiterated the need for a commitment to green investment, which the Infrastructure Bank will help with.

Environment & Green Energy

He also announced a £20 million to fund UK-wide competition to develop floating offshore wind demonstrators and help support the Government’s aim to generate enough electricity from offshore wind to power every home by 2030.

Mr. Sunak also announced £68 million to fund a UK-wide competition to deliver a first-of-its-kind long-duration energy storage prototypes which will reduce the cost of net zero by storing excess low carbon energy over longer periods.

An investment led recovery

The chancellor also spoke about Freeports, something which he said ‘could only be done now we have left the European Union.’ He announced that eight new English Freeports will be based in East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside and will be special economic zones with different rules to make it easier and cheaper to do business.

Beginning in April 2021, a new super-deduction will cut companies’ tax bill by 25p for every pound they invest in new equipment meaning they can reduce their taxable profits by 130% of the cost. This is worth £25 billion to companies over the two-year period the super-deduction will be in full effect.

Support for the whole UK

In addition to the announcements which apply to the whole of the UK, this budget also provides an additional £2.4 billion to the devolved administrations in 2021-22 through the Barnett formula.

  • £1.2 billion funding to the Scottish government
  • £740 million funding to the Welsh government
  • £410 million funding to the Northern Ireland Executive

Grahame Steed, BiP Solutions’ Content, Research and Communications Director said:

“Given the experience of the past 12 months, it is encouraging to see continued and increasing investment into public service delivery and particularly areas such as infrastructure and sustainable energy. This, and the exciting changes heralded by the Transforming Public Procurement Green Paper, make it a time of opportunity for all engaged in the public sector supply chain – and we look forward to supporting buyers and suppliers as we navigate our way through this period.”

Spring Budget Public Procurement Opportunities, Explained

Spring Budget Public Procurement Opportunities, Explained

Public Procurement Opportunities

The Spring Budget offered new routes for leveraging business growth through public procurement opportunities as Chancellor of the Exchequer Philip Hammond made commitments to boost productivity, and improve skills and infrastructure to boost economic growth.

Hammond delivered an upbeat assessment of the UK economy, which has outperformed the mostly pessimistic predictions for what would happen after the vote for Brexit last June. Growth in the UK economy picked up through 2016, and the Office for National Statistics (ONS) estimates that the economy grew 1.8% in real terms in 2016, second only to Germany among major advanced economies. The Office for Budget Responsibility (OBR) now forecasts that the UK economy will grow by 2% in 2017.

This outlook, combined with spending initiatives announced in the Budget, indicate that there will be public procurement opportunities to win new business regardless of your sector. To help you take full advantage, here is our breakdown of the who, why, where, what and when of 2017’s Spring Budget.

Who is likely to benefit most from this Budget?

Throughout the Spring Budget, the Chancellor focused on national productivity and was keen to stress that national debt remains too high while productivity remains too low.

Mr Hammond also noted that the Government is looking for innovative solutions to bridge this gap. To support the creation of such solutions, Mr Hammond announced the National Productivity Investment Fund (NPIF) in last year’s Autumn Statement. The fund, which will invest £23 billion into the British economy over the next five years, will focus on four key areas: transport, digital communications, R&D and housing.

The first funds from the NPIF will be allocated this year with £300 million committed to science and innovation research, £270m to researching disruptive technologies of the future, £16 million to a 5G mobile technology hub and £200 million to the Government’s National 5G Innovation Network.

With the Government explicitly stating that they are looking for new and innovative ways to solve their problems, suppliers who are able to differentiate themselves from competitors by offering previously unconsidered and innovative solutions will potentially see the most public procurement opportunities from the Spring Budget.

 

Why are critics calling this a ‘wait and see’ Budget?

Whilst a number of announcements were made, many have noted that the Government is keeping its powder dry in preparation for a post-Brexit economy and deferred making any big decisions until Article 50 has been triggered and the Brexit process has unfolded.

Whilst Mr Hammond delivered the Budget against a backdrop of better than expected economic performance, by delaying any significant spending announcements, he has given himself room to manoeuvre in the future should Brexit have more damaging economic consequences than currently forecast.

This was made clear prior to the Budget itself when Hammond, appearing on the BBC’s Andrew Marr programme, vowed to build a £60 billion Brexit war-chest in case the EU gives the UK a bad deal.

 

Where will there be subcontracting opportunities?

It’s often the case that government spending has a ‘trickle down’ effect with large companies winning sizeable contracts, but relying on subcontractors to deliver certain aspects of the work. Indeed, data from the National Audit Office shows that 60% of the Government’s spending with SMEs came via a larger contractor in the supply chain.

With a number of specific spending announcements in the Spring Budget, it is possible to identify where there are likely to be subcontracting opportunities in certain sectors or geographical areas in the near future; identifying these public procurement opportunities ahead of time can pay dividends in the future.

For example, the Government is investing £200 million into a programme of local projects to test ways to accelerate delivery of superfast broadband networks to every corner of the UK – with an emphasis on rural businesses that struggle with poor connections. Suppliers who win these contracts may be able to deliver innovative solutions with regards to the technology, but may find it harder to provide inventive construction solutions to lay the cables in these rural areas. This means that there are likely to be tendering opportunities for those in the construction industry who can provide this type of service.

 

What are the opportunities in my sector?

The Chancellor announced funding for specific projects in areas such as national productivity and social care, as well as investments in infrastructure to boost economic growth.

As previously mentioned, the £23 billion National Productivity Investment Fund is starting to be allocated this year, which will create opportunities across a number of sectors including technology and infrastructure. Additionally, the transport sector is in line to receive fresh investment with £690 million to be spent on new local transport projects, and £490 million made available by early autumn 2017.  Moreover, £149 billion will be spent on health in 2017/18, with an additional £425 million for investment in the NHS to come over the next three years.

To get started, you should identify what the public procurement opportunities in your sector and if you can supply the relevant services. Our Industry Highlights blog features the main takeaways from each sector, including a breakdown of where the money will be spent and what it will be spent on.

 

When should I get started?

You may have earmarked a particular investment as a key opportunity to sell to the public sector and be waiting until the tender officially goes to market. However, with the competitive nature of tendering for government contracts, by then it may already be too late.

As soon as you have identified the opportunity, you should be striking up pre-tender conversations with buyers and looking for ways to put yourself in the best position to win the tender.

Pre-market engagement is crucial to success in winning government contracts. If you’re not engaging as early as possible, it’s likely that you’re already falling behind the competition.

Spring Budget 2017 – Industry Highlights

Spring Budget 2017 – Industry Highlights

spring budget 2017

Chancellor of the Exchequer Philip Hammond presented the Government’s Spring Budget on 8 March, focusing on national productivity, social care, changes to self-employment regulations and business tax rates, as well as investments in infrastructure to boost economic growth.

The £23 billion National Productivity Investment Fund (NPIF), which was announced in the last Autumn Statement, is starting to be allocated, with £300 million committed to science and innovation research, £270 million to researching the disruptive technologies of the future, £16 million to a 5G mobile technology hub and £200 million to the Government’s National 5G Innovation Network.

The Spring Budget, which was Mr Hammond’s first and is to be his last with the Government moving towards a single fiscal event taking place each autumn, also announced fresh investment into a number of sectors.

Read on to discover what public sector pipelines of work await your industry sector.

Regional Government:

Local Authorities:

  • Local authorities will benefit from a £300 million fund to deliver discretionary relief to target individual cases in their local areas.

 Infrastructure:

  • National Productivity Investment Fund (NPIF) to provide £23 billion of infrastructure additional spending, to ensure that the UK’s economy is ‘fit for the future’.
  • The NPIF will provide major additional spending in areas that are key to boosting productivity, including:
    • Transport
    • Digital Communications
    • Research and Development (R&D)
    • Housing
    • Infrastructure funding for roads in the Northern Powerhouse and Midlands Engine, as well as a fund to tackle urban congestion; there was also a welcome emphasis on technical skills.
  • NPIF will invest £740 million in digital infrastructure by 2020/21 to support the next generation of fast and reliable mobile and broadband communications for consumers and businesses. This includes:
  • Creating a new National 5G Innovation Network to trial and demonstrate 5G applications, and for the UK to become a world leader in the next wave of mobile technology and services.
    • The first phase will invest up to £16 million in a cutting-edge 5G facility with the technology to run the trials, delivered through cooperation between leading 5G research institutions. A new centre of 5G expertise within government will oversee this programme, working with public and private sector partners. Funding for future trials will be awarded on a competitive basis.
  • £200 million for local projects to leverage private sector investment in the Government’s National 5G Innovation Network.
  • £250 million to be invested over the next four years, with plans to build the pipeline of high-skilled research talent necessary for a growing and innovative economy. This includes:
    • £90 million to provide an additional 1000 PhD places in areas aligned with the Industrial Strategy, 85% of which will be in STEM disciplines with 40% directly helping strengthen collaboration between business and academia through industrial partnerships.
    • £160 million to support new fellowships for early and mid-career researchers in areas aligned to the Industrial Strategy.
  • £500 million investment in technical education for 16 to 19 year olds with new ‘T-levels’ to be introduced in autumn 2019. Students will be able to choose from 15 different routes such as construction, digital or agriculture; as part of the course, all students will take part in an industry work placement.
    The Government will also provide maintenance loans for students doing higher-level technical courses at National Colleges and Institutes of Technology – like those available to university students.
  • £210 million will create new fellowships, including programmes to attract top global talent to conduct research in areas such as bioscience and biotechnology, quantum technologies, and satellite and space technology.
  • £2 billion for adult social care over the next three years, with the aim of providing high-quality social care to more people to help ease pressure on the NHS.
  • £425 million investment in the NHS over the next three years, including:
    • £325 million to be invested in a first set of the best local Sustainability and Transformation Plans (STPs) to improve patient services in local regions.
    • £100 million to go to A&E departments in 2017/18, to help them manage demand ahead of next winter, and help patients get to primary care faster.
  • £216 million to be invested in school maintenance projects.

 Housing:

  • £36 billion to be spent on housing and environment in 2017/18.

 

Health & Social Care:

  • £149 billion to be spent in health in 2017/18, with an additional £425 million for investment in the NHS to come over the next three years. This includes:
    • £100 million to go towards accident and emergency departments in 2017/18 to help them prepare for winter and provide more on-site GP facilities.
  • An additional £2 billion earmarked for adult social care spending over the next three years.

Transport:

  • £37 billion to be spent on transport in 2017/18.
  • £690 million to be spent on new local transport projects, with £490 million made available by early autumn 2017.
  • This funding is allocated through the National Productivity Investment Fund with the aim of improving congestion on roads and public transport, and includes:
  • £220 million to improve congestion points on national roads.
  • £90 million going to the North.
  • £23 million going to the Midlands.
  • Supporting improvements on the A483 corridor in Cheshire and on the Leicester Outer Ring Road.
    • More details of individual schemes to be announced by the Department for Transport shortly.

Defence & Security:

  • £48 billion to be spent on defence in 2017/18.

Research & Development:

  • £4.7 billion from the NPIF spent on R&D, to support the UK’s world-leading research and ensure that the next generation of discoveries are made, developed and commercialised in Britain.

Education

  • £102 billion to be spent on education in 2017/18.
  • £320 million to fund new free schools and £216 million to be invested in school maintenance.
  • Free transport scheme for children from poorer families to go to selective schools.

Technology:

  • £270 million invested to launch the Industrial Strategy Challenge Fund (ISCF) to develop disruptive technologies that have the potential to transform the UK economy. This includes investment on projects such as:
  • Leading the world in the development, design and manufacture of batteries that will power the next generation of electric vehicles, helping to tackle air pollution.
  • Developing cutting-edge artificial intelligence and robotics systems that will operate in extreme and hazardous environments, including offshore energy, nuclear energy, space and deep mining.
  • Accelerating patient access to new drugs and treatments through developing brand-new medicine manufacturing technologies, helping to improve public health.

Oil & Gas:

  • A panel of industry experts is to be established to mull how tax can assist sales of North Sea oil and gas fields, with a report of the findings due at the Autumn Budget 2017.

SMEs:

  • Small businesses and landlords under the VAT threshold will have an extra year to prepare for Making Tax Digital (MTD).
  • Unincorporated businesses (businesses owned privately by one or more people) that have an annual turnover below the VAT registration threshold will have until April 2019 to prepare before MTD becomes mandatory.
  • Under MTD, businesses will use digital software to keep tax records and update HMRC quarterly.
  • £435 million to support businesses affected by the business rates relief revaluation. This means no small business that is coming out of small business rates relief will pay more than £600 more in business rates this year than they did in 2016/17.
  • Funding for local authorities will allow them to provide £300 million of discretionary relief to provide help to businesses most affected by the revaluation.
  • From April 2017, pubs with a rateable value up to £100,000 will be able to claim a £1000 business rates discount for one year.

BiP Solutions Limited is a company registered in Scotland with Company Number SC086146 and VAT number 383030966 and having its registered office at Medius, 60 Pacific Quay, Glasgow, G51 1DZ.

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