Essential steps to reindustrialisation at the Autumn Budget

Prime Minister Andy Burnham has made reindustrialisation a priority for his government. Putting it at the heart of his plans to drive "growth in every postcode", he has pledged support to help create more "world-beating British manufacturers".

The forthcoming Budget will be the first test of whether action will back up the warm words. It is an opportunity to turbocharge the drive to reindustrialise the UK. To do so, however, the Prime Minister and his Chancellor must make a clean break from policies that hold back manufacturers and make it harder to invest, expand and recruit.

Reindustrialisation will require concrete steps to address the costs of doing business and the barriers to developing the next generation of manufacturing talent. To this end, Make UK's Budget Submission is putting forward proposals for how the Autumn Budget can address challenges across energy, employment, investment and innovation to boost manufacturing.

No issue is more immediate and critical for manufacturers than energy costs. UK manufacturers pay the highest industrial costs in the world, and the global energy price shocks are exacerbating this. If this is not addressed, British manufacturing faces an inflationary spiral.

Make UK's data shows that 58% of manufacturers are passing increased costs to consumers by raising prices. Reducing our industrial users’ energy costs so they are more comparable to those paid by their peers on the continent is therefore no longer just an international competition issue; it’s essential to controlling inflation in the UK.

The British Industrial Competitive Scheme (BICS), which will reduce electricity costs by up to £40 per megawatt hour for manufacturing frontier industries, will provide welcome relief, but it needs to go further and faster. It should be open to all manufacturers, not just those in eligible sectors, and it should be introduced without delay. Manufacturers cannot wait until April 2027 for the exemption from paying the indirect costs of the Renewables Obligation and Feed-in Tariffs, or October 2027, when the exemption for the Capacity Market kicks in.

Longer term, to drive reindustrialisation, investment and growth across the UK, the Chancellor should consider removing policy levies from electricity bills and shifting these onto general taxation. Cutting electricity costs would boost industrial investment and electrification, and creating a lower-cost energy system is an essential precursor to long-term reindustrialisation.

As with energy, employment costs have risen rapidly in recent years. The reduction in the national insurance contributions earnings threshold from £9,100 to £5,000 and increase in the rate from 13.8% to 15% has increased manufacturers' average cost per employee by about £950 a year. Combined with rises in the minimum wage and the introduction of the Employment Rights Act, this has added significant pressure on manufacturers.

These changes have not just added to costs at a time when margins are tight. They have also made manufacturers much less willing to hire young people and for early-career roles. The changes have made it harder for manufacturers to take a chance on young people and apprentices at a time when government wants to tackle the rising number of NEETs (not in education, employment or training) and move people into work.

To achieve that goal and encourage recruitment and retention, the government should at least partly reverse the NIC changes by increasing the Employer threshold from £5,000 to £7,500.

At the same time, the Prime Minister’s ambition for stronger local and regional skills provision will only be realised if funding for apprenticeships is sustainable. Apprenticeship starts in engineering and manufacturing have fallen by more than 40%, and many manufacturers cannot access the training they need locally.

To address this, the Budget should also raise the maximum apprenticeship funding band to £35,000. The current £27,000 limit does not meet the cost of delivery, leaving employers to make up a shortfall of up to £8,000 per apprentice, making them less likely to hire new apprentices, resulting in lower growth and fewer opportunities for young people.

Business rates are a barrier to growth. Changes in business rate multipliers (with a new large business multiplier of 50.8p from April 2026) and revaluations have added an average of 10% to manufacturers' rate bills – a £939 million cost to the sector.

High fixed costs constrain investment and growth, and business rates especially act as a disincentive to investment in productive assets. The way rateable values are assessed means that improvements or additions to commercial property, from extending a warehouse or adding a production line to installing fixed plants or machinery, can add to the rates bill.

The government has sought to soften the rise in rates by providing transitional relief to slow the pace of cost increases. Nevertheless, many manufacturers have not had sufficient time to update their budgets and plan for the year ahead. The Chancellor should use the Budget to increase transitional relief for manufacturers for the current financial year, effectively delaying the cost of business rates incurred since April 2026 by 12 months. This would give manufacturers breathing space amid rising costs and allow them to focus on growth.

Longer term, the government should seek to reform business rates to move towards a more proportionate system linked to business performance. It should explore alternative models for taxing physical properties that account for business performance or occupancy type. Business rates could be linked to business size and type, so charges reflect the property's occupant, allowing reduced multipliers for SMEs, for example, or linked directly to turnover and sales to ensure taxes are proportional to performance.

Reform would encourage expansion and productivity improvements, building business confidence and support reindustrialisation across all regions.

The Prime Minister doesn't just want world-beating British manufacturers; he wants them "at the frontier of new technology”. That's an ambition many manufacturers share. Artificial intelligence, especially, has the potential to transform productivity, competitiveness and growth across industry. But many manufacturers need support to move from pilot projects to deployment. They lack expertise to assess their readiness for AI adoption, identify capability gaps and navigate the support available.

Without guidance, they lack confidence. They delay investment, productivity gains remain unrealised and promising projects fail to move beyond the pilot stage.

The government could accelerate industrial AI adoption through targeted support, helping manufacturers implement AI technologies at scale. This could help address some of the major barriers to growth manufacturers face, such as energy and employment costs. Industrial AI and wider digitalisation can improve energy efficiency and productivity, enhancing competitiveness, supporting sustainability, creating higher value jobs, and strengthening local economies.

The government could help achieve this ambition by expanding its Made Smarter programme encouraging the adoption of digital technologies in manufacturing to include AI adoption and energy efficiency. It can provide a clear, coordinated pathway from AI readiness to deployment, with funding to support practical diagnostics, leadership capability, workforce training, data readiness assessments, and hands-on implementation support.

It should also strengthen Made Smarter to help manufacturers capture and use data more effectively. Better data use is the foundation for higher productivity and scaling adoption of industrial AI and other advanced technologies.

Reindustrialising Britain is a worthy ambition and would make a major contribution to the growth the government and country badly need. Increasing manufacturing’s share of GDP from 10% to 15% could add £142 billion to the economy. But that ambition can only be realised if the government is prepared to tackle the barriers holding manufacturers back: high energy costs, skills shortages, weak investment conditions and growing regulatory burdens.

The Budget will give us a strong indication of whether the government is willing to turn reindustrialisation from an aspiration into a reality.

Visit Make UK to read its full Autumn Budget 2026 Submission.