UK summer budget draws mixed response from process and energy industries
09 July 2015
Chancellor George Osborne presented his 2015 summer Budget to Parliament on July 8, receiving a mixed reaction from the engineering and energy industries. For the oil and gas industry, Osborne built upon March’s Budget announcement regarding the Investment Allowance – effectively broadening the types of investment that qualify.
“With continued signs that investment in the UK Continental Shelf is falling rapidly, it is vital the scope of the Investment Allowance, announced in the March Budget, encourages all forms of productive investment if it is to provide the strongest engine for growth,” said Deirdre Michie, chief executive of industry trade body Oil & Gas UK.
“We are pleased to note that the government has today taken steps to extend this allowance as they previously proposed and eagerly anticipate the required legislation by the end of the summer.
“In addition, the announced 2% cut in corporation tax over the next five years, will support companies throughout the sector’s supply chain and help its competitiveness,” Michie said.
But she pointed out the rate of exploration on the UKCS remains extremely low, with just 14 exploration wells drilled in 2014, and only seven so far this year – at a time when industry should be aiming to drill upwards of 30 wells a year to reinvigorate the basin.
“That harsh fact underlines why we need effective regulatory, licensing and fiscal measures in place by Budget 2016 at the latest,” she said.
Steve Elliott, Chief Executive of the Chemical Industries Association (CIA), welcomed the Chancellor’s measures to encourage investment in our energy sector, alongside protecting the science budget to support UK innovation and promoting exports – where the chemicals sector features strongly.
He was pleased at the announcement of exemptions from Carbon Price Floor (CPF) on inputs to heat from our on-site Combined Heat and Power (CHP) generation but said government must make further progress towards a comprehensive strategy for energy intensive industries such as chemicals to ensure they could sustain their contribution to greening the economy as it decarbonises.
The CIA welcomed the introduction of an above the line R&D tax credit, but was disappointed that no equivalent support is given to encourage capital investment.
He concluded that the budget was a positive step forward, but more ambition was required if the country was to compete in the long run on the international stage.
Meanwhile, Chris Hunt, the Director General of the UK Petroleum Industry Association, said the decision not to raise duty on road fuels was “welcome news for both motorists and hauliers.”
UKPIA pointed out that In 2014, duty and VAT accounted on average for 62% of the price of fuel at the pump. Pre-tax pump prices in the UK have been consistently amongst the lowest in the EU over the last ten or more years.
Helen Meese, head of engineering in society at the Institution of Mechanical Engineers (IMechE), welcomed some of the proposals outlined in the Budget, but said the government must go much further if it wanted to secure the country’s skills.
“The UK’s skills shortage is one of the most critical issues facing the country,” Meese said.
“Without engineers we have no hope of making the large infrastructure projects needed in the energy, transport and health sectors a reality.”
Like Meese, EEF chief executive Terry Scuoler had a mixed reaction to the Budget.
The manufacturing trade body chief executive said the Chancellor had done well in supporting business investment allowances, phased reductions in corporation tax and funding for road improvements.
However, he was disappointed on the training levy. “Until we see the detail it is not clear how this will help deliver the high quality apprenticeships we urgently need,” Scuoler said.
“Employers must be in the driving seat on this reform to ensure we get the right quality of apprenticeships and training.