MSPs from the Scottish Parliament’s Finance and Public Administration Committee will visit Largs next week (Wednesday 30 August) to hear from local people about Scotland’s Budget challenges.
The visit is part of a parliamentary inquiry into the sustainability of Scotland’s finances.
It follows the Scottish Government’s forecast that public spending in Scotland is set to outstrip income expected by £1 billion in 2024/25, rising to £1.9 billion in 2027-28.
This means the government is forecasting that it will not have sufficient money to fund the spending it currently wishes to make.
The politicians are meeting with local people, organisations and businesses to hear their views on what the Scottish Government’s priorities should be in its 2024-25 budget.
Their views will help inform the committee’s scrutiny of the government’s budget in the autumn.
Finance and Public Administration Committee Convener Kenneth Gibson MSP said:“The focus of our work this year is how the budget for 2024-25 and beyond will ensure Scotland’s finances are sustainable in both the short and longer-term.
“It is an incredibly important subject matter given the forecast budget pressures and longer-term demographic challenges in Scotland.
“Coming to Largs and talking to North Coast people – including businesses, third sector bodies and residents – will enable us to hear different views of the impact of the Scottish Government’s tax and spending decisions.
“And that matters because the budget and the long-term sustainability of Scotland’s finances will affect everyone in the country.
“I am delighted that we will also meet the following day in Seamill to discuss our committee’s work programme for the forthcoming parliamentary year.”
Participants will be asked to give views on:
what should the Scottish Government’s priorities be for its budget in 2024-25, given the challenges that Scotland faces next year, and in the years ahead?
Studio growth enabled inward film and HETV production spend to increase by 110%, driving increases in employment and economic value in Scotland’s screen sector
Overall production spend in Scotland grew by 55%, including content made by Scotland-based producers
Screen Scotland has published latest figures evidencing continued growth in the value of Scotland’s film and TV industries to the country’s economy including in Edinburgh.
Commissioned by Screen Scotland and produced by Saffery Champness and Nordicity, the independent report which looks at The Economic Value of the Screen Sector in Scotland in 2021 finds that significant growth was found in all areas of production, particularly inward investment film and High-End TV (HETV) production:
Inward investment film and HETV production spend increased by 110%, from £165.3 million in 2019 to £347.4 million in 2021.
In total, an estimated £617.4 million was spent on the production of film, TV and other audiovisual content in Scotland in 2021, compared to £398.6 million in 2019, up 55% compared to 2019*.
This included content made by Scotland-based producers, producers based outside of Scotland filming in Scotland and Public Service Broadcasters (PSBs) commissioned content.
The employment impact in Scotland’s production sub-sector rose from 5,120 full time equivalent jobs (FTEs) in 2019 to 7,150 FTEs in 2021, a 39% increase. The employment impact across Scotland’s entire sector increased at a lower rate, by 5.6%, from 10,280 FTEs in 2019 to 10,940 FTEs in 2021 – with the covid impacts in that year on employment in the cinema exhibition and screen tourism accounting for the difference.
According to the research, undertaken by Saffery Champness and Nordicity as a follow-up to their recent study of 2019, growth is in large part due to sector development work undertaken since Screen Scotland’s formation in 2018, including significant skills development work and the opening of new or expanded studio facilities, particularly FirstStage Studios in Edinburgh, where Prime Video’s The Rig (which has returned to Scotland to film series 2) and Anansi Boys were filmed, and the expansion of The Pyramids in West Lothian, home to another Prime Video HETV series, Good Omens 2.
These studio facilities have made Scotland an even more attractive place to film, opening in time to catch the global post pandemic boom in production**.
Alongside film and TV development and production, the wide-ranging study analyses the economic contribution of the full screen sector value chain – film and TV development and production, animation, VFX and post-production, film and TV distribution, TV broadcast, film exhibition – and extends into the supply chains that provide services at each stage of the content process, including facilities, equipment, transport, catering and accommodation.
Beyond that direct supply chain, the study looks at where the screen sector stimulates economic activity elsewhere in the Scottish economy: screen tourism, the education and training sectors and infrastructure.
In total, the screen sector in Scotland contributed Gross Value Added (GVA) of £627 million to Scotland’s economy in 2021, providing 10,930 full time equivalent (FTE) jobs, up from £568 million and 10,940 FTEs in 2019. GVA is the standard measure used by the Office for National Statistics (ONS) and other national statistical agencies for measuring the monetary value of economic activity and the economic performance of industries.
Isabel Davis, Screen Scotland’s Executive Director said: “The growth in all forms of production in Scotland between 2019 and 2021 is a phenomenal result. It shows us that public investment via Screen Scotland in infrastructure, development, production and skills development, combined with attractive levels of production incentive are the catalyst for a successful industry.
“Now is the time to build on these newly created jobs and growth with a sustained funding commitment towards skills development, attraction of large-scale productions and a focus on the development of locally originated film and television. Screen Scotland is committed to delivering further growth, working hand in hand with the commercial production and studio sectors.
“This will rely upon sustained funding and support in order for Scotland to seize the opportunities ahead of it and see that growth trajectory continue.”
Authors of the Report, Stephen Bristow, Partner, Saffery Champness LLP and Dustin Chodorowicz, Partner, Nordicity noted further significant Report findings: “The doubling of Scotland’s annual level of inward investment film and high-end TV production between 2019 and 2021, was nearly three times the 39% growth rate experienced by the UK as a whole, according to published BFI statistics.
“In addition, Scotland’s screen sector GVA rose by 9.7% in those two years – well ahead of the 1.2% increase in nominal GVA (i.e. not adjusted for the effects of price inflation) posted by Scotland’s overall economy during that period.”
Wellbeing Economy Secretary, Neil Gray said: “This report highlights another banner year for Scotland’s screen sector, which is all the more significant for the jobs, investment and economic growth it has delivered. The scale of the return to the Scottish economy from the investment in screen production is remarkable.
“Beyond film and TV, this report also highlights how our tourism, hospitality and construction sectors have benefitted from this investment through screen tourism, catering contracts, and infrastructure expansion, and the supply chains that support these activities.
“The efforts of Screen Scotland have been key to this result and we are committed to working with them and the sector to ensure this growth and the wider benefits being delivered can continue.”
Bob Last, who’s FirstStage Studios in Leith has housed Prime Video’s Anansi Boys and The Rig, and where the second series of The Rig is currently filming, said: “We at FirstStage Studios are excited to have created a facility that helps our customers and their creatives realise ambitious visions for audiences both local and global.
“We are pleased to have rapidly built relationships with, in particular Amazon Prime Video, enabling us to play a part in anchoring more of this global industry and its varied employment opportunities in Scotland and Leith.
“We thank all those who have chosen to make our facility their creative home and especially the crews whose hard work we witness daily, every one of them is a part of the good news today’s Screen Scotland report outlines.”
As a highly experienced Scotland-based film and HETV producer, and currently producer on The Rig, Suzanne Reid commented: “As I progressed in my career the higher-level productions I wanted to work on just didn’t exist in Scotland, in part due to a lack of studio facilities – so I had to head to England and Wales for this type of work.
“It has been wonderful to be working back at home and to be able to work alongside our brilliantly talented Scottish crew on such a highly ambitious series. While it may have been a very successful couple of years for the Scottish Film and TV industry, we need to keep pushing for more high-end productions to be based in Scotland so we can continue to grow our talent base and keep them working at home.”
TUC General Secretary Paul Nowak declares “now is the time to start a national conversation about taxing wealth”
The TUC has called for a national conversation on taxing wealth, as it publishes new analysis which shows a modest wealth tax on the richest 140,000 individuals – which is around 0.3% of the UK population – could deliver a £10.4 bn boost for the public purse.
The analysis sets out options for taxing the small number of individuals with wealth over £3 million, £5 million and £10 million, excluding pensions.
The TUC says these options are illustrative examples of what a wealth tax could look like, using Spain’s existing policy as a potential model.
“It’s time for a national conversation”
The TUC says it is publishing the analysis to “kickstart a conversation” about tax – with the TUC general secretary Paul Nowak declaring “now is the time to start a national conversation about taxing wealth”.
According to analysis commissioned by the TUC, conducted by Landman Economics, a cumulative one-off wealth tax (excluding pensions wealth) on:
A wealth threshold of £3 million with a marginal tax rate of 1.7% would yield £2.7 billion (with the tax payable on wealth above £3 million by 142,000 individuals or 0.27% of adults in the UK)
A further wealth threshold of £5 million with a marginal tax rate of 2.1% would yield an additional £3.2 billion (with the tax payable on wealth above £5 million by 48,000 individuals or 0.09% of adults in the UK)
A further wealth threshold of £10 million with a marginal tax rate of 3.5 % would yield an additional £4.6 billion (with the tax payable on wealth above £10 million by 17,000 individuals or 0.02% of adults in the UK).
Together this could raise more than £10 billion for the exchequer.
The tax would apply as a marginal rate on wealth and assets above each threshold – in the same way income tax works. For example:
Someone with £3 million wealth would pay nothing.
Someone with £4m wealth would pay tax on £1m of their wealth – paying £17,000.
Someone with £9m would pay tax on £6m of their wealth – paying £118,000
Analysis reveals that of those with wealth over £3 million (excluding pensions), three quarters derives from wealth other than their primary residence, and over half comes from financial wealth:
Net financial (non-pension) wealth: 53.3%
Primary residence: 23.6%
Other residences: 18.7%
Physical wealth: 4.4%
The TUC says further debate is needed on what type of wealth is included in this kind of tax.
The union body has already called on the government to equalise capital gains tax with income tax which could raise around £14 billion.
The union body says it is inherently “unfair and unjust” that people who get income from assets or property get off more lightly than someone who relies on work.
Tale of two Britains
The TUC says increasing wealth inequality is resulting in a “tale of two Britains”.
While working people have been “hit by a pay loss of historic proportions” after the longest wage squeeze in modern history, the wealth of multimillionaires and billionaires has boomed.
Financial wealth over the decade from 2008-10 to 2018-20 increased by around £0.9tn (80 per cent) from £1.1tn to £1.9tn.
TUC General Secretary Paul Nowak said: “It’s time to start a national conversation about how we tax wealth in this country.
“It is absurd that a nurse pays a bigger share of their income in tax than a city trader does on profits from their investment portfolio.
“That’s not only fundamentally unfair and unjust – it’s bad for our economy too.
“Our broken tax system means those at the top are hoarding wealth and getting richer and richer, while working people struggle to get by.
“That is starving our economy of spending – as it’s working people who spend their money on our high streets – and it’s starving our public services of much-needed funds.
“This research sets out potential options for getting those with the broadest shoulders to pay a fairer share.
“This is a debate we should not be afraid of having. The Chancellor should use his autumn statement to make sure the wealthiest pay their fair share of tax.”
Commenting on widening inequality over the past decade, Paul added: “Widening wealth inequality means we are seeing a tale of two Britains.
“While working people are suffering the longest pay squeeze in modern history, the super-rich are coining it in.
“Porsche sales are at record highs, bankers’ bonuses are at eyewatering levels, and CEO pay is surging.
“Enough is enough. We need an economy that rewards work – not just wealth.
“Fair tax must play a central role in rewiring our economy to work for working people.”
Energy Security Secretary Grant Shapps meets with industry leaders to discuss the Government’s energy security and business plans to invest over £100bn, including to accelerate renewables, to help grow our economy
Discussions include new powers to protect critical energy infrastructure from disruptive protest groups and maintain energy supply
Summit hosted at No10 Downing Street as part of Government push to strengthen energy security, support jobs and attract investment in the UK’s energy industry
Leaders of the UK’s energy industry will meet in Downing Street today to discuss their plans to collectively invest over £100bn and create jobs around the country, working with Government to boost energy security.
Energy Security Secretary Grant Shapps will meet a wide range of energy companies – including EDF, SSE, Shell and BP, who collectively have multi-billion pound plans to invest in low and zero-carbon projects.
Each of these will support thousands of jobs across the country, which could help reduce household energy bills while delivering cleaner, more secure sources of energy, to deliver on the ambition to have the lowest wholesale electricity prices in Europe by 2035.
Mr Shapps will outline Government measures to protect UK energy supplies from disruption both at home and abroad. He will highlight decisions to invest in home-grown energy sources – including renewables, a revival in nuclear power, and backing North Sea oil and gas.
But he will also highlight measures to protect critical energy infrastructure from disruptive protests. This follows in the wake of protests such as those at the Kingsbury and Thurrock clusters of oil terminals and Grangemouth refinery.
The Public Order Act now includes a new criminal offence of interfering with key national infrastructure – including oil refineries – aimed at preventing protests from causing or threatening public safety or serious disruption.
It particularly addresses tactics that these protesters have used such as locking on and tunneling.
Energy Security Secretary Grant Shapps said: “We need to send the message loud and clear to the likes of Putin that we will never again be held to ransom with energy supply. The companies I am meeting in Downing Street today will be at the heart of that.
“Energy industry leaders can see that this Government will back home-grown, secure energy – whether that’s renewables, our revival in nuclear, or our support for our vital oil and gas industry in the North Sea.
“But it is a sad reality that we also need to protect our critical national infrastructure from disruptive protests. Today I’ll be setting out what we are doing to achieve this and want to hear from the energy companies the vital work they are doing in this area.”
Energy firms have demonstrated their confidence to invest in the UK, and collectively the firms meeting at 10 Downing Street plan to invest tens of billions over the next decade in energy projects across the country.
Some of these investment commitments include:
Shell UK aims to invest £20-25 billion in the UK energy system over the next 10 years. More than 75% of this is intended for low and zero-carbon products and services.
BP intends to invest up to £18bn in the UK to the end of 2030.
SSE plc have announced plans to invest £18bn up to 2027 in low carbon infrastructure creating 1,000 new jobs every year to 2025. SSE’s plans could see it invest up to £40bn across the decade to 2031/32.
National Grid plc will be investing over £16bn in the five-year period to 2026.
EDF have outlined plans to invest £13bn to 2025.
RWE have an ambition to invest up to £15bn in clean energy infrastructure in the UK by 2030.
To provide greater reassurance and support to industry, the Energy Security Secretary will outline the range of measures the Government is taking to protect energy infrastructure from intentional disruption, as well as maintaining the network’s strong resilience.
This includes:
The Public Order Act, with specific powers coming into effect in July to protect critical infrastructure;
Working with the Police to ensure protestors cannot gain unauthorised access to sites;
The work of the Civil Nuclear Constabulary, whose 1,300 officers and 300 support staff operate to protect nuclear sites across England, Scotland and Wales
The Energy Security Secretary will also discuss progress on major UK energy investment projects across renewable projects, oil and gas, new nuclear, and new technologies such as carbon capture.
They include:
Carbon capture – earlier this week, the Prime Minister announced two further projects in Humber and the North East of Scotland, which can move towards becoming clusters for this new technology – alongside eight already being considered, and two existing clusters in the North East, and in the North West and Wales.
Oil and gas – The Prime Minister has also confirmed future licensing rounds will continue for the extraction of oil and gas in the North Sea – while the North Sea Transition Authority reports they have received over 115 bids from 76 companies in the latest licensing round.
Nuclear – companies can now register their interest with the UK’s new organisation, Great British Nuclear, to secure funding support to develop new technologies including Small Modular Reactors.
Offshore wind – the UK has the world’s largest operational wind farms off its shores, with plans for further development off the East Anglia Coast and at Dogger Bank in the North East which could collectively provide enough clean energy for over 6.5million homes.
This follows (larger than thought before) contractions in March and April, which means that in total the economy has contracted by 0.4% in the 3 months to May.
Now, these monthly figures can of course be volatile, and we shouldn’t read too much into the individual movements every month. The first estimates that are produced for each month and quarter are also more subject to revision than older estimates.
This has been underlined by the media line “Scotland is growing at 4 times of the UK” (which we discussed the issues with as part of a previous update) now no longer being true for the first quarter of the year. For the first quarter, the new estimate is that Scotland grew by 0.2% compared to 0.1% for the UK as a whole.
The recent monthly contractions have also meant that the size of the Scottish economy has dipped slightly below that all-important level of February 2020, the so-called “pre-pandemic levels of output”.
Bearing in mind the caveats above, we can see in the latest figures significant contractions in the wholesale and retail and accommodation and food services sectors, perhaps signalling the contraction in consumer-facing services we have been expecting given the pressure on household budgets.
In production, there was a very large contraction in the electricity and gas supply sector, which, given the dominance of wind generation in Scotland, is likely to reflect the weather in May (i.e. it wasn’t very windy). The construction sector has also shown contractions in each of the last 3 months, although in general, this sector’s output is well above pre-pandemic levels.
Towards the end of August, we’ll get the figures for June which will give us the first estimate of the figure for the full quarter. There will have to be a significant recovery in June for that not to be a contraction overall. Of course, there would also have to be a contraction in Q3 for us to be technically in recession.
We’ll also be looking with interest at the new forecasts produced by the Bank of England next week. The decision on rates will of course take the headlines. The Bank’s view may soften slightly, with market expectations coalescing around a 0.25 rise in the base rate. However, we’ll also be digging through their new forecasts to see what the Bank is expecting to happen for the rest of 2023 and beyond.
We’ll discuss all this in next week’s update! Enjoy the weekend, whether you’re seeing Barbie, Oppenheimer, or simply dodging the rain at a BBQ!
Increased tax relief to boost Britain’s animated film production
Measure is “about backing business to innovate and grow the UK economy”
Draft legislation also published to clarify design details underpinning a simplified Research and Development Scheme
Animated film productions in the UK are set for a boost as the government reveals increased tax relief, to take effect from 1 January 2024.
The creative industry has grown at more than 1.5 times the rate of the wider economy over the past decade, making it an important sector for the Chancellor’s plan to grow the economy.
The new tax changes announced today are expected to be worth £5 million each year to business and come alongside the Audio-Visual Expenditure Credit which was uplifted at budget from 33.33% to 39%. This also follows the Creative Industries Sector Vision published last month which set an ambition to grow the creative industries by an extra £50 billion by 2030.
These changes are a key part of the government’s plan to get the economy growing and make the UK the best place in the world to start and grow a business.
Financial Secretary to the Treasury Victoria Atkins said: “We want the UK to be the best place to start and grow a business and while we have the lowest corporation tax rate in the G7, we are not complacent.
“The changes we are making are about backing business to innovate and grow the UK economy, creating good jobs across the country.”
This measure is part of 23 tax announcements published as part of the government’s ‘Legislation Day’, where draft legislation for an upcoming Finance Bill is published, as well as technical tax documents and consultations mostly from measures announced at the Spring Budget.
Also published is the proposed design for a simplified R&D scheme, which would be born out of a merger from two previous schemes, as well as draft legislation also published to cement a further new £500 million per year scheme to support 20,000 R&D intensive SMEs.
A final decision will be made in the Autumn on whether to merge the Research and Development Expenditure Credit and Small Medium Enterprise relief schemes to form a new scheme. A merged scheme would simplify the system, by creating a single set of qualifying rules, and giving clarity on how much could be claimed before claims are made.
On Legislation Day the government also announced that:
From today, any Ukrainian who has arrived in the UK under the Family, Sponsor and Extension Ukrainian visa schemes will no longer need to register or tax their vehicle. This will last 36 months, in line with the length of their visas, and can be applied retrospectively from one’s arrival, potentially saving them hundreds of pounds.
Income tax will be exempt on payments made under the Family Network Support Package, which are aimed to keep children out of state care and in their family network where appropriate and in their best interests. The Department for Education will set out further details on the pilot scheme in the summer.
It will simplify the process so people who need to start paying the High Income Child Benefit Charge will not need to fill out a Self-Assessment form to pay the charge, but will be able to do it through their tax code. HMRC will set out in due course how it will do this.
The House of Commons adjourned on Thursday 20 July for summer recess and will next sit on Monday 4 September at 2.30pm.
The economy in recent weeks has resembled the Scottish weather: not quite the summer we hoped for but definitely could be worse, and we hope for better to come (writes Fraser of Allander’s Institute’s EMMA CONGREVE).
Inflation easing
This week’s announcement on inflation coming in at 7.9% in the year to June 2023 was lower than markets were expecting.
According to the ONS, the fall was driven by lower motor fuel prices and an easing in the rate of food price growth. We’re sure readers of the FAI weekly update don’t need to be reminded of this, but just in case, remember that a drop in the inflation rate does not mean that average prices are falling.
However, as the Resolution Foundation’s Torsten Bell pointed out in a useful thread on Twitter, in June 2023 it looks like we (finally) had a situation where average wage growth was higher than inflation, meaning that real wages rose.
Of course, averages are just that, and will not apply to all, but it’s a chink of sunshine nonetheless. Many will hope that this easing of inflation will ease the pressure on the Bank of England’s Monetary Policy Committee.
The next rate decision is due on the 3rd of August.
Recent labour market news
On the 11th June, the latest labour market statistics were released covering the period March to May 2023.
The employment rate reduced slightly over this period, leading to an increase in both unemployment (people seeking work) and inactivity (people not working and not seeking work).
Inactivity statistics have been moving in opposite directions in Scotland compared to the rest of the UK over recent quarters, although as the chart shows, this follows a period of relative convergence of the UK and Scottish rates, and rates have tended to be higher in Scotland than the UK average over recent years.
Chart: Economic Inactivity Rates in Scotland and UK
“Risky” Finances
According to the OBR, in a report published on the 13th July, the pressure on UK public finances has risen considerably over the last year, due to a combination of inflation and interest rate rises, and accelerated changes in demographic change.
One key part of this is the fact that the UK has a relatively high proportion of inflation linked debt compared to other advanced economies. Their frankly terrifying forecasts see UK public debt rising to over 300% of GDP over the next 50 years, from around 100% now (indeed statistics out today show that the UK’s debt pile is now officially higher than GDP in June 2023).
Nothing is inevitable, and these forecasts are drawn up to provide context and evidence for government decision-making in the years ahead. Difficult decisions, as ever, loom.
That’s it for this week. If you haven’t seen it yet, I’d encourage you to watch our colleague Adam’s presentation as part of this year’s Pride in Economics Event. You can find it on our website.
Tata Group announces new multibillion-pound electric car battery factory to be built in the UK – one of the largest ever investments in the UK automotive sector.
Investment will create up to 4,000 new direct jobs, and thousands more in the wider supply chain – driving forward the Prime Minister’s priority to grow the economy.
New gigafactory set to provide almost half of the battery production needed by 2030 – turbocharging UK’s switch to zero emissions vehicles.
The UK has been chosen as the home of Tata Group’s first ‘gigafactory’ outside India, in a move set to create thousands of jobs and bring a huge boost to the UK’s automotive sector.
Tata Group confirmed the UK had secured one of the largest ever investments in the UK auto industry today (19 July). The gigafactory will secure UK-produced batteries for another Tata Sons investment, Jaguar Land Rover, as well as other manufacturers in the UK and Europe.
The new gigafactory, at 40GWh, will be one of the largest in Europe. It will create up to 4,000 highly skilled jobs, as well as thousands of further jobs in the wider supply chain for battery materials and critical raw minerals, helping grow the economy and take forward the UK’s commitment to net zero.
Prime Minister Rishi Sunak said:“Tata Group’s multi-billion-pound investment in a new battery factory in the UK is testament to the strength of our car manufacturing industry and its skilled workers.
“With the global transition to zero emission vehicles well underway, this will help grow our economy by driving forward our lead in battery technology whilst creating as many as 4,000 jobs, and thousands more in the supply chain.
“We can be incredibly proud that Britain has been chosen as home to Tata Group’s first gigafactory outside India, securing our place as one of the most attractive places to build electric vehicles.”
Mr N Chandrasekaran, Chairman, Tata Sons, said: “The Tata Group is deeply committed to a sustainable future across our business.
“Today, I am delighted to announce the Tata Group will be setting up one of Europe’s largest battery cell manufacturing facilities in the UK. Our multi-billion-pound investment will bring state-of-the-art technology to the country, helping to power the automotive sector’s transition to electric mobility, anchored by our own business, JLR (Jaguar LandRover).
“With this strategic investment, the Tata Group further strengthens its commitment to the UK, alongside our many companies operating here across technology, consumer, hospitality, steel, chemicals, and automotive.
“I also want to thank His Majesty’s Government, which has worked so closely with us to enable this investment.”
The investment of over £4 billion represents a historic moment for the UK’s growing electric vehicles industry.
The new gigafactory will supply JLR’s future battery electric models including the Range Rover, Defender, Discovery and Jaguar brands, with the potential to also supply other car manufacturers. Production at the new gigafactory is due to start in 2026.
This investment will be crucial to boosting the UK’s battery manufacturing capacity needed to support the electric vehicle industry in the long term. With an initial output of 40GWh it will also provide almost half of the battery production that the Faraday Institution estimates the UK will need by 2030.
Business and Trade Secretary Kemi Badenoch said: “Today’s multibillion-pound investment demonstrates that this Government has got the right plan when it comes to the automotive sector.
“We are backing the UK car industry to help grow our economy as we transition to electric vehicles, and this latest investment will secure thousands of highly-skilled jobs across the country.
“Tata’s decision is a major vote of confidence in UK automotive. The Government is committed to making the UK one of the best places in the world for automotive investment, as evidenced by the Automotive Transformation Fund, the British Industry Supercharger, and the strong programme of support for research and development.”
Chancellor of the Exchequer Jeremy Hunt said:“This is a huge vote of confidence in the UK and one that will drive growth in our economy, creating thousands of jobs and powering our transition to electric cars.
“Tata Group’s gigafactory builds on the strength of our manufacturing industry and shows we’re on the right track, backing the sectors that will underpin our future prosperity for decades to come.”
Energy Security Secretary Grant Shapps said: “Today’s announcement from Tata is excellent news. We have been working tirelessly with the company, and across government, to make the case for why the UK is the best place for them to invest.
“This new gigafactory puts us firmly in the fast lane to becoming the capital of Europe’s electric car market, and makes crystal clear how they see the UK as the place to be for their future growth.
“With thousands of jobs on site and in the supply chain, this new factory will be the cornerstone of our automotive industry, backing manufacturers to develop and expand, and customers to make the switch from petrol and diesel.”
Business and Trade Secretary Kemi Badenoch has formally signed the treaty to accede to CPTPP trade group in New Zealand this morning
Business and Trade Secretary Kemi Badenoch formally signed the treaty confirming the UK’s accession to CPTPP – the Indo-Pacific trade bloc now worth £12 trillion in GDP – in New Zealand today [Sunday 16th]
To celebrate this huge moment, the Government released new figures showing CPTPP-owned businesses employed one in 100 UK workers, with membership expected to turbocharge investment in the UK even further
British whisky and cars amongst 99% of current UK goods exports to CPTPP set to be eligible for zero tariffs as UK businesses given unparalleled access to market of over 500 million people
Business and Trade Secretary Kemi Badenoch has formally signed the treaty to accede to CPTPP trade group in New Zealand this morning [Sunday], kickstarting the UK’s membership of a modern and ambitious trade deal spanning 12 economies across Asia, the Pacific, and now Europe.
The Secretary of State is in Auckland to put pen to paper on this ‘mega deal’, alongside New Zealand Trade Minister Damien O’Connor, Canadian Trade Minister Mary Ng, Japanese Minister for Economic Revitalisation Goto Shigeyuki and Australian Deputy Trade Minister Tim Ayres.
The signature is the formal confirmation of agreement for the UK to join the group, following substantial conclusion of negotiations earlier this year. The Government will now seek to ratify the agreement, which will include parliamentary scrutiny, whilst other CPTPP countries complete their own legislative processes.
The signing comes as a new government report reveals one in every 100 UK workers was employed by a business headquartered in a CPTPP member nation in 2019, equating to over 400,000 jobs across the country.
Membership of the trade group is expected to spark further investment in the UK by CPTPP countries, already worth £182 billion in 2021, by guaranteeing protections for investors.
Ian Stuart, CEO at HSBC UK, said: “The UK’s formal accession to CPTPP marks a significant milestone for UK trade, enabling ambitious British businesses to connect with the world’s most exciting growth markets for start-ups, innovation and technology.
“At HSBC UK, we are incredibly excited about the opportunities this agreement presents; as the world’s leading global trade bank we will support UK businesses to achieve their full potential and open up a world of opportunity.”
Cath White, Head of International at Belvoir Farm said: “The UK’s accession to CPTPP will mean more than 99% of UK goods exported to CPTPP member countries will be eligible for zero tariffs.
“It will also ease administrative and commercial trade barriers to allow talented and passionate UK producers to tell their story on a worldwide scale.
“At Belvoir Farm, we export 20% of our turnover to markets across the globe, with one third of exports bound for Indo-Pacific markets, including Australia, New Zealand, Japan and Singapore. This is a fantastic opportunity to grow British brands, especially this year when the spotlight is on the UK.”
Ian Galbraith, Group Strategy Director at Mott MacDonald, said: “Mott MacDonald is strongly supportive of UK accession to CPTPP and proud to have been part of the technical board advising the British negotiating team.
“The Partnership’s ambitious services and procurement chapters pave the way for greater recognition of professional competence in engineering and architecture, and establish open, fair and transparent competition rules in government procurement, allowing world-leading firms like Mott MacDonald to win and service new contracts across the many countries covered by CPTPP.”
Speaking ahead of the signing, Kemi Badenoch said:“I’m delighted to be here in New Zealand to sign a deal that will be a big boost for British businesses and deliver billions of pounds in additional trade, as well as open up huge opportunities and unparalleled access to a market of over 500 million people.
“We are using our status as an independent trading nation to join an exciting, growing, forward-looking trade bloc, which will help grow the UK economy and build on the hundreds of thousands of jobs CPTPP-owned businesses already support up and down the country.”
The report found CPTPP investment accounted for:
Over £240 billion in turnover in London, £35 billion in the South East and £18 billion in the East of England
The creation of 26,000 jobs in 2021 and 2022
75% of all employment in CPTPP-owned businesses was outside of London
One in 50 jobs in the North East
One in every 25 jobs in the manufacturing sector
The report also found that CPTPP companies punch above their weight economically. While they account for 0.3% of all businesses in the UK, they generate 6.1% of the UK’s total turnover – 20 times higher than the proportion of businesses they represent.
The UK will be the first European member and first new member since CPTPP was created, which would have been impossible had we remained in the EU. With the UK as a member, CPTPP will have a combined GDP of £12 trillion and account for 15% of global GDP.
The UK Government will now take the steps needed to bring the agreement into force, expected to be next year.
Being part of CPTPP will mean that more than 99 per cent of current UK goods exports to CPTPP countries will be eligible for zero tariffs.
Dairy farmers, for example, will benefit from reduced tariffs on cheese and butter exports to Canada, Chile, Japan and Mexico. This builds on the £23.9 million worth of dairy products we exported to these countries in 2022.
The UK Government says the agreement is a gateway to the wider Indo-Pacific which is set to account for the majority of global growth and around half of the world’s middle-class consumers in the decades to come, bringing new opportunities for British businesses and supporting jobs.
Chancellor outlines reforms to boost pensions and increase investment in British businesses
the ‘Mansion House Reforms’ could unlock an additional £75 billion for high growth businesses, while reforms to defined contribution pension schemes will increase a typical earner’s pension pot by 12% over the course of a career
comprehensive reforms will increase pension pots by as much as £16,000
The reforms will also unlock up to £75 billion of additional investment from defined contribution and local government pensions, supporting the Prime Minister’s priority of growing the economy, and delivering tangible benefits to pensions savers.
The United Kingdom has the largest pension market in Europe, worth over £2.5 trillion. Over the past ten years Automatic Enrolment has helped an extra ten million people save for their futures, with £115 billion saved in 2021, but how this money is invested is limiting returns for savers. Comparable Australian schemes invest ten times more in private markets than UK schemes, reaping the rewards that UK savers are missing out on.
To level the playing field, the Chancellor and the Lord Mayor have supported an agreement between nine of the UK’s largest Defined Contribution pension providers, committing them to the objective of allocating 5% of assets in their default funds to unlisted equities by 2030. These providers represent over £400 billion in assets and the majority of the UK’s Defined Contribution workplace pensions market.
This could unlock up to £50 billion of investment in high growth companies by 2030 if all UK Defined Contribution pension schemes follow suit.
More effective investments by defined contribution pension schemes will also increase savers’ pension pots by up to 12%, or as much as £16,000 for an average earner.
Chancellor of the Exchequer Jeremy Hunt said:“British pensioners should benefit from British business success. By unlocking investment, we will boost retirement income by over £1,000 a year for typical earner over the course of their career.
“This also means more investment in our most promising companies, driving growth in the UK.”
Secretary of State for Work and Pensions Mel Stride said:“British workers should have the confidence that their pension savings are working as hard as they are.
“Our reforms will benefit savers and society – unlocking investment into pioneering UK businesses, growing the economy, and helping the record number of people in this country saving into a pension to achieve the retirement they want.”
The Chancellor’s Mansion House Reforms will also deliver better returns for savers through a new Value for Money Framework which will make clear that investment decisions made by pension firms should be based on overall long-term returns and not simply costs. Pension schemes which are not achieving the best possible outcome for their members will be wound up into larger, better performing schemes.
Analysis shows that over a five-year period there can be as much as 46% difference between the best and worst performing pension schemes. This means that a saver with a pot of £10,000 could have notionally lost £5,000 over a 5-year period from being in a lowest performing scheme.
The Mansion House Reforms will be guided by the Chancellor’s three golden rules: to secure the best possible outcome for pension savers; to always prioritise a strong and diversified gilt market as we seek to deliver an evolutionary, rather than revolutionary, change in our pensions market; and to strengthen the UK’s position as a leading financial centre to create wealth and fund public services.
To ensure that the money unlocked by these reforms is invested quickly and effectively, the Chancellor has asked the British Business Bank to explore the case for government to play a greater role in establishing investment vehicles, drawing upon the BBB’s skills and expertise.
This will complement the £250 million of support that government has made available through the Long-term Investment for Technology and Science (LIFTS) initiative to incentivise new industry-led investment vehicles.
The government will also encourage the establishment of new Collective Defined Contribution funds which can invest more effectively by pooling assets as well as launch a call for evidence to explore how we can support pension trustees to improve their skills, overcome cultural barriers and realise the best outcomes for their pension schemes and subsequently their members.
Defined Benefit pensions
For the Local Government Pension Schemes a consultation will be launched on setting an ambition to double existing investments in private equity to 10%, which could unlock £25 billion by 2030. The consultation proposes a deadline of March 2025 for all Local Government Pension Scheme funds to transfer their assets into LGPS pools and setting a direction that each pool should exceed £50 billion of assets.
To improve outcomes for savers in a highly fragmented market, with over 5,000 Defined Benefit Schemes, the government will set out its plans on introducing a permanent superfund regulatory regime to provide sponsoring employers and trustees with a new way of managing Defined Benefit liabilities.
A new call for evidence will also launch tomorrow on the possible role of the Pension Protection Fund and the part Defined Benefit schemes could play in productive investment whilst securing members’ interests and protecting the sound functioning and effectiveness of the gilt market.
Capital Markets
The UK has the largest stock market in Europe and one of the deepest in the world – the London Stock Exchange had the most Initial Public Offerings (IPOs) outside of the US in 2021.
A comprehensive set of reforms will help attract the fastest growing companies in the world to grow and list in the UK. Prospectuses will be simplified, another milestone of Lord Hill’s UK Listing Review, replacing the EU’s outdated regime.
Firm’s prospectuses for investors will be easier to produce, more accessible and understandable, saving companies time and money and attracting more firms to do business in the UK.
Protectionist rules inherited from our time in the EU will be abolished. The Share Trading Obligation and Double Volume Cap have held back UK businesses and will be removed so firms can access the best and most liquid markets anywhere in the world.
The government has also accepted all of Rachel Kent’s Research Review published today, paving the way for a new ‘Research Platform’ that will provide a one-stop-shop for firms looking for research experts. It also sets the path for potentially removing the unbundling rules – an inherited EU law that requires brokers to charge a separate fee for research.
The Chancellor will set out plans to establish an entirely new kind of stock market that allows private companies to access capital markets without floating on a stock exchange. This ‘Intermittent Trading Venue’ would be a world first and will help firms grow and boost the UK economy. It will be complemented by a move to make shares fully digital rather than written on paper, saving businesses time and money.
This builds on the Chancellor’s Edinburgh Reforms and Solvency II reforms which will unlock over £100 billion of productive investment from insurance firms across the UK over a decade.
Seizing the opportunities of the future
To ensure the continued success of the UK’s world-leading financial services sector, firms must be ready to innovate faster, with regulators willing to support them as they do.
Following the Financial Services and Markets Act 2023 passing into law, the government has announced that it is commencing repeal of almost 100 pieces of unnecessary retained EU law for financial services, further simplifying the UK’s regulatory rulebook.
The government launched an independent review into the future of payments – led by Joe Garner, former Chief Executive Officer of Nationwide Building Society – to help deliver the next generation of world class retail payments, including looking at mobile payments.
The government also welcomes a report suggesting ways to move to fully digital shares, scrapping outdated paper-based shares. This will make markets more efficient and modernize how people own shares.
Further information
The Mansion House Compact members are: Aviva; Scottish Widows; L&G; Aegon; Phoenix; Nest; Smart Pension; M&G; Mercer.
The package of reforms announced yesterday could help increase pension pots for an average earner who starts saving at 18 by 12% over their career – over £1,000 more a year in retirement – all whilst supporting UK economy, businesses, and employment.
Analysis shows a difference in returns between schemes over a 5-year period of up to 46% in some cases. This means that a saver with a pot of £10,000 could have notionally lost £5,000 over a 5-year period from being in a lowest performing scheme.
Reaction to the Chancellor’s Mansion House Reforms
Jamie Dimon, Chairman & CEO, JPMorgan Chase said:“Great financial centers stay competitive by responding to the market and evolving through the kinds of important iterations that the Chancellor has announced.
“It’s also good to see the U.K. preparing for the industries of tomorrow considering the great promise of life sciences and A.I. as cornerstones of the economy in the years to come.”
Sir Jon Symonds CBE, Chair, GSK said:“I welcome these important reforms which will further strengthen the UK capital markets and support economic growth.
“The changes will help increase investment returns for pension savers through improved access to all asset classes including in high growth sectors, and ensure the UK’s most innovative companies are better supported by UK capital to stay in this country as they scale to maturity.”
Brent Hoberman, Executive Chairman & Co-Founder, Founders Forum, Founders Factory said:“The planned pension reforms will enable for capital to be productively invested in funds and scaleup companies in the UK.
“This should be welcome news to the UK industries of the future, their ability to attract more capital will create more national champions and generate growth, jobs and increased tax revenue.
“The reforms will enable the UK to build on the positive momentum in these key parts of the economy drive further synergies between it’s world class financial institutions and entrepreneurial base.”
C. S. Venkatakrishnan, Group Chief Executive, Barclays said:“The UK has needed a bold, forward-looking policy agenda and industrial strategy to grow the economy.
“These Mansion House Reforms are an important step in the right direction in mobilising private capital to support growth and innovation.”
Irene Graham OBE, CEO, ScaleUp Institute said:“The package of measures announced by the Chancellor today are very much welcomed by the ScaleUp Institute.
“They contain significant and innovative solutions which will help to enable easier and simpler access to capital markets and patient growth capital. These new initiatives, coupled with the reforms already underway, will support and fuel the global ambitions of our scaleups, and high-potential scaling businesses, across all sectors and all areas of the UK.”
Miles Celic, Chief Executive Officer, TheCityUK, said: ““The competitiveness and attractiveness of any successful international financial centre must, by definition, always be a work in progress. The Chancellor is right to be ambitious in building on the UK’s successes and recognising that we can’t afford to be complacent.
“The Mansion House Reforms are ambitious, pragmatic and necessary. They will underpin the UK industry’s future success. Most importantly, their main beneficiaries will be the British people, who will gain from greater investments in growing businesses, revitalising communities and improving retirements.”
Chris Hulatt, Co-Founder, Octopus Group said: ““We welcome government’s efforts to make the UK a more attractive place to start a business, and support measures that provide additional opportunities for private companies to raise capital.
“Finding new ways for the most skilled and talented entrepreneurs to access capital as they build businesses is fundamental to helping the UK maintain its place as the best place to start, build and scale a business.”
Noel Quinn, Group Chief Executive, HSBC said:“I welcome the strong and comprehensive package of measures announced by the Chancellor in his Mansion House speech.
“Unlocking equity to support companies in innovative high-growth sectors such as technology and life sciences is vital to the future growth of the UK economy.”
Lord Mayor, Nicholas Lyons said: ““These reforms and the Mansion House Compact mark a historic turning point that will accomplish the dual aim of securing a brighter future for retirees and channelling billions into our economy.
“I’m proud to have convened key industry players to make this commitment to unlock £50bn in capital by the end of the decade which will improve returns for pension savers and support firms to grow, stay and list in the UK.”
Tim Orton, Chief Investment Officer, Aegon UK said: ““Aegon UK is proud to be a founder signatory of the Mansion House Compact which will help deliver better long-term outcomes for our customers.
“We are committed to ensuring our customers can access and share in the growth and success of innovative companies we invest in. We will use our scale and expertise to develop investment solutions seeking to improve the retirement outcomes of the millions of members of the defined contribution pension schemes we support. The Compact will also create opportunities that help deliver our climate targets as we progress towards net zero.”
Sir Nigel Wilson, Group CEO, Legal & General said:“As the UK’s largest manager of money for pension clients, L&G is pleased to support the ambition set by the Compact.
“Increasing investment in science, technology and infrastructure will support better returns for the tens of millions saving for their retirement, as well as stimulate much needed long-term growth for the UK economy.”
Mark Fawcett, CEO, Nest Invest said:““For many years now, illiquid assets have been integral to diversified DC pension schemes around the world.
” It’s been a key driver behind Nest setting up our own private market mandates to ensure our members aren’t missing out. Nest will continue to increase our investment in unlisted equities, helping our 12 million members benefit from the strong returns these types of deals can typically offer.”
Ruston Smith, Chair, Smart said: ““Smart Pension is committed to securing better outcomes for long-term savers. Giving UK savers access to higher net returns by investing in unlisted equities, including innovative, high-growth UK companies as part of a well diversified portfolio, will deliver these outcomes over time.
“We are pleased to be a signatory of the Mansion House Compact and, as a successful British fintech, we are proud to be supporting the country’s technology sector, helping home-grown start-ups and scale-ups to flourish and thrive.”
Scottish Widows, CEO, Chirantan Barua said: ““The industry needs to modernise the investment options available to customers.
“With the right consumer protections in place, the proposals announced today could make a huge difference to our customers and the wider UK economy. I’m proud that Scottish Widows is a founding signatory of the Mansion House Compact.”
Phil Parkinson, Investments and Retirement Leader, Mercer said:“Mercer supports proposals that lead to improved pension scheme member outcomes.
“As a global investment solutions provider, we see first-hand the value that illiquid asset allocations can bring to investors’ portfolios from a risk and a return perspective and are in favour of initiatives designed to unlock this asset class for DC members.”
Edward Braham, Chair, M&G said:“Patient capital put to work in companies or projects over multiple decades is essential to support economic growth and importantly, capture value for people’s pensions as they save for their retirement.
“M&G’s heritage is in investing in private markets, whether it is through infrastructure, real estate or innovative companies with purpose. We are democratising access to private markets through the Prudential With Profits Fund, and are supportive of DC pension reforms that encourage more investment of this kind that has potential to result in positive outcomes for savers.”
Mike Eakins, Chief Investment Officer, Phoenix Group said:““We are proud to sign the Compact, which is an important step to allow UK long-term savers to invest in a more diversified portfolio, giving them access to the potential returns of a broader range of assets, in line with their international counterparts.
“Currently, only 9% of UK pension funds are invested in alternative assets as compared to 23% in other major pensions markets. With the right regulatory environment, Phoenix Group could invest up to £40 billion in sustainable and/or productive assets to support economic growth, levelling up and the climate change agenda whilst also keeping policyholder protection at its core.”
