Executive Summary
The Autumn Budget 2025 sets out measures to strengthen economic foundations, tackle inflation, and drive growth. For manufacturing businesses in the North East of England, the Budget does offer some support and positive measures for manufacturers but also introduces tax and regulatory changes that are likely to increase costs and, overall, the impact is likely to be additional costs being borne by the sector.
Key Positives for Manufacturing
The following would be seen as the main positives for the manufacturing sector:
Potential relief from energy costs: the British Industry Supercharger uplift and British Industrial Competitiveness Scheme from 2027 are intended to cut electricity costs for energy-intensive industries by £35–40/MWh.
Infrastructure & Regional Investment: £15.6bn for city-region transport, £902m local growth fund, and £500m Mayoral Revolving Growth Fund for North and Midlands.
Industrial Strategy & Sector Support: The North East would be expected to benefit from the DRIVE35 program being extended to 2035 with £4bn funding for zero-emission automotive technology; alongside the National Wealth Fund being expected to mobilise £70bn private investment.
Helping younger workers with skills & improving the workforce: An additional £1.5bn funding has been announced for the Youth Guarantee and Growth & Skills Levy, including fully funded SME apprenticeships for under-25s along with targeted initiatives such as Technical Excellence Colleges in advanced manufacturing.
Tax Incentives: The 100% first-year allowances for zero-emission cars and EV charge points extended to 2027.
Key Negatives for Manufacturing
Wage costs increases: The increases in the National Minimum Wage and also the cap in relation to the use of salary sacrifice for pensions will be likely to flow through into higher wage bills for many organisations which in turn will be likely to create higher costs in materials and consumables from suppliers where the costs are being passed on.
Tax Increases for business owners: Higher property income tax rates from April 2027; dividend and savings tax rates up by 2 percentage points have been announced.
Motoring & Logistics Costs: Electric Vehicle Excise Duty (eVED) from April 2028 (which has been estimated to cost £240/year for typical EV drivers); fuel duty returning to pre-2022 levels by March 2027. Commercial vehicles are likely to be excluded from eVED and so the impact will be limited to cars initially.
Business Rates: High-value multiplier (50.8p) for properties over £500k RV may impact large manufacturing sites.
Writing Down Allowances
The largest negative impact for manufacturers will be felt in the form of slower tax relief for capital allowances. The main rate of writing down allowances for plant and machinery will reduce from 18% to 14% from April 2026, slowing tax relief on existing capital expenditure.
A new 40% first-year allowance will apply to qualifying new assets, but this is of limited use compared to Full Expensing or the Annual Investment Allowance and continues to exclude second-hand equipment. Manufacturers should consider accelerating investment before April 2026 and model long-term tax impacts of the reduction in rates of relief.
Detailed Changes to EMI Schemes
Enterprise Management Incentive Schemes are widely used in the sector and would be seen as a positive incentive scheme for key management teams. The Budget includes the following changes:
- Employee limit increased to 500 (from 250);
- Gross assets test raised to £120m;
- The overall share option limit for the value the company can grant has increased to £6m; and
- Maximum holding period extended to 15 years.
Regional Impact for North East
In summary, the Budget does have some limited good news for manufacturers in our region. The North-East will be expected to benefit from its previously announced AI Growth Zone designation, access to local growth funds and transport investment. Manufacturing sectors such as automotive and clean energy stand to gain from DRIVE35 and EV incentives, while advanced manufacturing clusters will benefit from targeted skills funding and infrastructure upgrades.
