Autumn Budget 2024: What’s in store for business and the energy sector?

Rachel Reeves made history as the first woman to hold up the Chancellor of the Exchequer’s red box. But will her Budget for autumn 2024 be memorable for other reasons? Here’s your quick summary of what it means for UK businesses and the energy sector.

Retail, hospitality and leisure help

Business rates relief was scheduled to end in March 2025 for retail, hospitality and leisure businesses. These sectors have been deeply concerned about the forthcoming “cliff edge”. The autumn Budget offers reassurance with a promise to continue 40% relief in 2025-2026, up to a cap of £10,000.

Great British Energy

Making Britain a “clean energy superpower” was a key element of Labour’s pre-election promises. Creating a publicly owned energy generation company, Great British Energy, is at the heart of this mission. The government’s first Budget provides £100 million of capital funding for GBE to develop clean energy projects in 2025-26. There will also be £25 million to set GBE up as a company.

National Wealth Fund and new approach to investment

Reeves announced a changed approach to investment and how we measure it. In a nutshell, rather than just looking at the cost (which allows governments to sell counterproductive cuts as “savings”) we will measure investment as a proportion of GDP.

The newly created National Wealth Fund is designed to fund projects that will ultimately grow the economy and catalyse private investment. It will be the vehicle that initially delivers funding to Great British Energy.

2025-26 CCUS investment

Earlier this month the government promised £21.7bn of public investment across two clusters for carbon capture, utilisation and storage (CCUS) over the next 25 years. The autumn 2024 Budget promises that £3.9 billion of this multi-year investment will be spent in 2025-26.

Much of the coming CCUS capacity will be used to reduce the carbon footprint of hydrogen production, turning so-called grey hydrogen into blue by preventing fossil fuel emissions from reaching the atmosphere.

Green hydrogen funding

Truly green, carbon-free hydrogen is made through electrolysis powered by renewable energy, but this represents less than 1% of global production. Today Reeves announced 11 new green hydrogen projects in the UK. This is “amongst the first commercial-scale [green hydrogen] projects anywhere in the world,” according to the Chancellor.

These seem to be the same 11 projects that were shortlisted under the previous government’s first Hydrogen Allocation Round (HAR1). The published version of the Budget seems to confirm this by giving the location of four of them: two in Scotland, two in Wales. Trade publication H2 View has reached out to the government for confirmation and more detail.

EV incentives

The government will be spending £2 billion on the automotive sector. This includes, but is not limited to, zero emissions vehicles and greener motoring technology.

There are several tax incentives designed to encourage the transition to EVs:

• Keeping EV incentives in the Company Car Tax scheme;
• Extending the 100% first-year tax allowances for zero-emission cars and EV chargepoints;
• Making a distinction between EVs and other types of car (including hybrids) when setting Vehicle Excise Duty first-year rates.

There will be no corresponding disincentives for petrol and diesel drivers. Fuel duty will be frozen for the 15^th year in a row and the Chancellor will also not reverse the 5p cut made by Rishi Sunak as Chancellor in March 2022. This will cost the Treasury £3 billion and save the average motorist £59 in 2025-26.

Raising the Energy Profits Levy

The Energy Profits Levy on oil and gas companies will increase from 35% to 38% and be extended to 31 March 2030. When you add in corporation tax this brings the headline rate to 78%, among the highest in the world.  But the reality is that fossil fuel companies operating in the North Sea can offset this by claiming losses to pay much less – often less than they receive from the government in subsidies. The autumn 2024 Budget retains 100% first-year allowances, meaning that the entire cost of new extraction equipment can be written off against tax.