Given the noise that always accompanies a Budget we wanted to delve a little deeper into the Red Book and pull out some of the ‘under the radar’ measures announced that - while not getting much media attention - are important to business.
Public sector productivity programme - “The government is committing £4.2 billion of funding at Spring Budget 2024 to improve the productivity of the public sector… investing in technological and digital transformation to help unlock £35 billion cumulative savings by 2029‑30.”
Verdict: certainly not missed in the press, with it being a cornerstone of the current budget. However, little has been said about the likely enormous procurement opportunity this programme embodies for those with the right expertise. As the fiscal envelope likely remains tight in coming years, expect more productivity programmes and opportunities to lend a hand on them.
Contracts for Difference - “The government has published full parameters for the Contracts for Difference Allocation Round 6 (AR6), including setting the largest ever budget for a single round, of over £1 billion.”
Verdict: the last round of the CfD competition was widely considered a disaster, seeing no bids coming in from the offshore wind sector - the offer from HMG was too meagre in the face of inflation to elicit any interest from offshore industry. Lessons appear to have been learned, with the next round set to see the CfD’s biggest budget yet.
Nationally Significant Infrastructure Projects - “The government is publishing a response to the consultation on operational reforms to the NSIP consenting process and the updated National Networks National Policy Statement.”
Verdict: progress of projects through the NSIP regime has become frustratingly slow with time. New reforms will allow for a fast track route and enhanced support services from the Planning Inspectorate to allow high-quality projects to move through the early stages of the process faster.
Full(er) expensing - “Draft legislation on an extension of full expensing to assets for leasing will be published shortly. Full expensing will be extended to assets for leasing when fiscal conditions allow.”
Verdict: full expensing (the ability of firms to claim 100% capital allowances on qualifying plant and machinery investments) was made permanent at the Autumn Statement, in future, it will be possible to make similar claims on leases, enabling a much wider range of firms to take advantage of the offer, which up until now has had a strong bias towards heavy industry.
New securities exchange for private firms - “The government is consulting on the Private Intermittent Securities and Capital Exchange System (PISCES), a new innovative market that will allow private companies to scale and grow, and will boost the pipeline of future IPOs in the UK.”
Verdict: This move follows in the footsteps of Nasdaq Private Market, a similar exchange operational since 2013 which in 2023 crossed $45 billion in transactions. As more and more firms opt to remain private for longer, the UK initiative is potentially very timely - indeed, the London Stock Exchange Group has already indicated a willingness to set up such an exchange. Finally, it’s worth noting that a private exchange would complement the current drive for pension fund investment in private markets: the ability to sell a private stake on an exchange means liquidity constraints - a key obstacle for pension funds, some of which need daily liquidity - can be alleviated.
Confirmation of ESG ratings regulation - “The government will regulate the provision of ESG Ratings, where these assessments of ESG factors are used for investment decisions and influence capital allocation [...] A full consultation response and legislative steps will follow later this year.”
Verdict: If executed in a way that prioritises consistency and comparability, including with the rules proposed by the European Commission in June of last year, this move can alleviate what is perhaps the biggest problem in the burgeoning ESG ratings industry: lack of consistency, which makes, for example, within-sector comparisons of decarbonisation impossible. For firms investing heavily in the Net Zero transition, there is therefore a chance they will begin to see it reflected in their cost of capital to a greater extent than before.
Life sciences - “Building on the Autumn Statement 2023 announcement of £520 million new funding for Life Sciences manufacturing, the government is announcing that funding competitions for large scale investments will open for expressions of interest this summer with a separate competition for medium and smaller sized companies opening in the Autumn.”
Verdict: the government is throwing (even more of) its weight behind life sciences with previously announced funding pots opening up. Several housing and transport schemes have also been announced in Cambridge and London with the intent of enabling the growth of their life and health sciences hubs.
Devolution Deals - “...the government has agreed a deeper “trailblazer” devolution deal with the North East Mayoral Combined Authority… The government has finalised the first of these agreements with Surrey County Council, Buckinghamshire Council and Warwickshire County Council.”
Verdict: the North East Mayoral Combined Authority will be working towards seeing the same level of independence as the West Midlands or Greater Manchester Combined Authorities, with increased power over skills, local energy planning and transport functions. With the extension of further level 2 deals, more than two-thirds of England’s population will be living under some sort of devolution. For those not well acquainted with their relevant mayors and council leaders, now would be the time to ingratiate yourselves.