Spring Budget: MPA rues missed opportunity to boost investment and growth
The Mineral Products Association (MPA) has responded to today’s Spring Budget by calling for clearer action to accelerate investment, green growth and infrastructure delivery, compared to the relatively patchy and underwhelming agenda set out by the Chancellor.
The OBR’s revised growth projection of -0.2% for 2023, despite avoiding a “technical recession” over two quarters, is a poor performance, albeit better than their previous forecast.
The confirmation that the Aggregates Levy will be frozen for 2023-24 is a source of relief, although MPA is concerned that the Government plans to increase the Levy in line with RPI from 2024-25 onwards, and will push for this to be considered over the next year.
The decision to extend the 5p cut in fuel duty is also welcome, although the industry continues to endure the c. £100 million cost of the removal of red diesel last year. The £20 billion over 20 years for Carbon Capture, Usage and Storage (CCUS) is a positive step towards industrial decarbonisation. The Chancellor declared this was “paving the way to CCUS everywhere across the UK”, which is welcome news for sites that are not in easy reach of the CCUS clusters.
While the end of the ‘Super Deduction’ is regrettable, full expensing on plant and machinery investments is a welcome move that will go some way towards mitigating that, and MPA hopes it will be made permanent. However, the confirmation that Corporation Tax will still rise by six percentage points is disappointing, and will hinder the Chancellor’s stated ambition to spur investment.
The creation of Investment Zones and the forthcoming call for evidence aimed at addressing nutrient neutrality issues may help improve growth in construction activity. MPA awaits further detail and delivery in both cases. These measures do not compensate for the recently announced tranche of delays to infrastructure projects, including HS2 and multiple strategic road network schemes. Putting the brakes on these projects will increase costs, cause uncertainty for industry, and deter investment. Earlier this week, MPA wrote to the Chancellor and the Transport Secretary outlining the impact these delays will have on the supply chain and its ability to attract investment.
MPA believes further action will be needed to attract investment in British businesses, facilitate the construction and infrastructure projects necessary for future economic growth, and ensure that energy-intensive industries remain competitive during the net zero transition.
Jon Prichard, Chief Executive of MPA, said:
“The Chancellor’s announcement on funding for CCUS is welcome and important for the UK’s cement and lime producers. But following on from last week’s announcement of infrastructure delays, this Budget was a missed opportunity and does little to tackle Britain’s longstanding challenges on delivery of transport projects and housing.
“MPA’s key ask in our Budget submission was to focus on making the UK a competitive proposition for investment. Full expensing of investment partially softens the blow of increasing Corporation Tax and removing the super deduction, but it is still overall a move in the wrong direction.”
Aurelie Delannoy, Director of Economic Affairs at MPA, said:
“On balance, today’s Budget provides patchy support to growth. Full expensing is welcome although it is concerning that it is only in place for three years. In any case it does not fully compensate for the uncertainty created by weak economic activity, rising costs, the 6p increase in Corporation Tax, and wavering commitment to infrastructure.
“The announcement that the Aggregates Levy will return to being increased with inflation is unwelcome. There are weak environmental justifications for this tax, let alone increasing it, and increasing it will simply increase costs for housing, infrastructure and other construction projects.”