Autumn Budget 2026: What it means for engineering and manufacturing SMEs

The Government today published its Autumn Budget. Against a backdrop of inflationary pressures and high levels of government borrowing, there was a strong emphasis on attempting to bring down costs for both people and businesses. 

From reducing energy bills to supporting workforce training, today’s Budget includes measures that could support engineering and manufacturing SMEs as they run and grow their businesses. However, against a challenging economic backdrop, it is clear that these measures won't go far enough. Enginuity will continue to make the case for policy changes that can allow increasing numbers of SMEs to invest into skills, training and recruitment. 

Key announcements relevant to engineering and manufacturing SMEs include:  

• Support with industrial energy costs. 
• An increased National Minimum Wage and National Living Wage. 
• A roadmap for fiscal devolution, including a recommitment to apprenticeship brokerage services. 
• Greater clarity on the timeline for youth unemployment reforms. 
• Further investment in strategic industries such as life sciences, clean energy, aerospace and defence. 

Ann Watson MBE, CEO of Enginuity Group commented: "The Chancellor was correct to recognise the significant pressures facing businesses. Our most recent Snapshot Survey revealed that 80% of engineering and manufacturing SMEs faced pressure to raise prices due to increasing labour and raw material costs. The number of SMEs in the sector under pressure to raise prices due to energy costs had also more than doubled since the previous survey. The Chancellor’s actions to reduce energy costs facing employers is therefore certainly a welcome step. However, greater emphasis must now be placed on reducing the wider costs SMEs face, so they are able to create more jobs and invest increasing amounts in training the next generation.  

"Over the coming months, we look forward to greater clarity on the Government’s commitment to tackling youth unemployment. Right across the UK, many young people are struggling to find pathways into work. Meanwhile, around two-thirds of engineering and manufacturing SMEs say they are not running at full capacity. If Alan Milburn's final recommendations are to create more workplace opportunities for young people, government policy must also support SMEs to offer more workplace opportunities. Policymakers should explore targeted financial incentives to directly encourage greater employer investment in skills and training, offsetting those costs that currently hold employers back.     

"We are encouraged by the continued focus on devolution. If implemented correctly, Strategic Authorities have the potential to play an increasingly valuable role in bringing local employers and skills providers closer together. The commitment to expanded apprenticeship brokerage services at a regional level is especially welcome, helping smaller businesses navigate the apprenticeship system and connect with talent they may otherwise struggle to access. We look forward to working with Government and Strategic Authorities to ensure these services widen apprenticeship opportunities and address skills shortages in key growth sectors." 

Here’s a round-up of the key areas you need to know about:  

Employer costs, wages and tax  

• From 1 April 2027, the National Living Wage will increase by 3.9% to £13.21 per hour. The National Minimum Wage for 18- to 20-year-olds will also increase by 3.9% to £11.27 per hour. 
• The Government has confirmed that there will be no increase to the headline rates of Income Tax, National Insurance contributions or VAT.  

Energy costs  

• From April 2027, the British Industrial Competitiveness Scheme will provide more than 10,000 eligible manufacturers in Great Britain with electricity bill discounts of up to 25%, alongside a backdated payment reflecting support for 2026/27. The scheme is intended to bring industrial electricity costs closer to those faced by competitors elsewhere in Europe. 
• The Government will also introduce a new Cost Control Framework at the 2027 Spending Review and freeze the main Climate Change Levy rate on electricity from April 2028. Carbon Price Support will also be removed from April 2028. 
• The existing 5p fuel duty cut will be extended to 1 July 2027, alongside the Heavy Goods Vehicle road tax holiday. 

Apprenticeships, skills and young people  

• Publication of the Milburn Review's final recommendations has been confirmed for November, with the Government promising to respond by the end of the year. A White Paper will follow in early 2027, ahead of legislative changes.  
• The Government reannounced the Apprenticeship Brokerage system with a commitment to invest £100 million between 2027 and 2029 and expand the model from 7 to 14 Mayoral Strategic Authorities.  
• The Government will re-establish the Union Learning Fund in England to support learning and training among workers and support necessary upskilling.  
• Large Government construction and infrastructure projects will require at least 3% of the workforce to be apprentices.  
• The Government is establishing Technical Excellence Colleges for Defence in Scotland and Wales while also working with the Northern Ireland Executive on a region-wide defence skills and apprenticeship programme.  

Procurement 

• A new National Procurement Policy Statement will be laid in Parliament in March 2027, prioritising delivery of high-quality jobs, fair pay and skills opportunities.  
• The government will publish a new definition for a “UK supplier” in public procurement by January 2027, to get a better understanding of UK suppliers and sub-contractors across public supply chains.  
• The government has already published new guidance on applying social value in central government procurement. 

UK engineering and manufacturing 

• The new levy on gas bills in Great Britain will no longer be implemented, instead the Government will provide a £27 million uplift to Hydrogen Allocation Round 1 funding and publicly fund any future hydrogen public hydrogen contracts should they be deemed to provide value for money.  
• The Government has announced plans for a multi-decade cooperation agreement with Rolls Royce starting with a £2.5 billion programme for the next generation of gas turbine technologies.  
• Government has committed to fully funding the UK's Defence Investment Plan delivery.  
• Convatec will invest over £500 million over the next decade, supporting by government grant funding from the Life Sciences Transformation R&D Investment Fund, in a new global R&D hub in Manchester.  

Regional devolution 

The Government reiterated its commitment to regional devolution during the budget, promising "good growth in every postcode". Alongside the budget document HM Treasury published The Fiscal Devolution Roadmap: Reforming the Funding Model for Regional and Local Government in England. Key points from both the budget and Fiscal Devolution Roadmap can be found below:  

• Mayoral Strategic Authorities will receive a 20% share of business rates from 2027, increasing 100% retention by the end of the decade. Local Authorities will receive at least a 70% share.  
• Good Growth Funds will be rolled out across England in 2027-28 with the number of eligible areas increased. A bespoke borrowing facility of £1.5 million will be available to MSAs from 2028.  
• From April 2028 MSAs will receive a share of the income tax generated in their areas, further information on this is expected as part of the Government's Rewiring the State Delivery Plan.   
• Specific funding agreements include: 
• £200 million of investment from Kindeva, supporting the Life Sciences Manufacturing Fund, to strengthen manufacturing of respiratory medicines in Leeds.  
• £1.2 billion contract issued to Alstom's Derby Litchurch Lane Works to build 29 new battery-powered trains.  
• Local Growth Mission Fund commitments in Stafford, Liverpool and Bury.  

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