Hammond said: ‘The Midlands engine strategy is an important milestone, setting out the concrete actions we are taking, where we are not only investing in what it does well but also tackling some of the long standing productivity barriers in the region including skills and connectivity.’

The move will see the government invest £392m in the Midlands from the Local Growth Fund, on top of £1.5bn it has already put in. The cash will support projects including creating a global hub for space technology in Leicester and will also be spent on transport improvements, including £25m to tackle congestion and improve major employment sites in the Black Country and £12m to improve road connections around Loughborough.

It is also committing an additional £4m to support the operation of the Midlands engine partnership over the next two years, bringing together local enterprise partnerships, local authorities, businesses, academic institutions and others into a voluntary, regional partnership.

Elsewhere in the Budget, the Chancellor gave more details of how he plans to use the NPIF, which was announced at Autumn Statement 2016, and is designed to provide over £23bn of high-value investment between 2017-18 and 2021-22, with a focus on priority areas that are critical for improving productivity, including infrastructure.

Hammond said NPIF allocations have already been made for 2017-18, supporting local projects like improvements in Blackpool town centre, improving the A483 corridor in Cheshire, major maintenance of the Leicester outer ring road, and a new roundabout at Hales in Norfolk. He said £690m more will be competitively allocated to local authorities, with £490m made available by early autumn 2017.

The Budget also announced regional allocations of the £220m NPIF investment for pinch points on the strategic road network, with details of individual schemes to be announced by Department for Transport shortly.

Technology infrastructure

Hammond unveiled another new funding source, the Industrial Strategy Challenge Fund (ISCF) to support collaborations between business and the UK’s science base. An initial investment of £270m in 2017-18 is intended to kick-start the development of disruptive technologies. These include the development, design and manufacture of batteries that will power the next generation of electric vehicles, and developing artificial intelligence and robotics systems that will operate in extreme and hazardous environments.

Complementing the NPIF programmes, Hammond said a new Digital Infrastructure Investment Fund (DIIF) will be launched in spring 2017. Government investment of £400m will be at least matched by private sector investors, and will accelerate the deployment of full-fibre networks by providing developers with greater access to commercial finance.

Manish Gupta, head of transport corporate finance at EY, said: ‘Although short on major infrastructure announcements, the measures announced today underline the key role that skills and infrastructure investment play in addressing the UK’s overall productivity conundrum.

‘Digital infrastructure is set to get a boost through broadband and 5G, and local authorities competing for a £690m fund to remove bottlenecks from local road networks will reap benefits in a relatively short time.’

Neil Broadhead, PwC's infrastructure leader, said: ‘Today's announcement shows the government is committed to boosting national productivity by investing in areas like transport and energy.

‘It goes some distance in fleshing out the plan set out in the Autumn statement which will allow smaller schemes dispersed around the country to be completed and deliver benefits to the general public much more quickly.’

5G strategy

The Budget also announced the launch of the government’s 5G strategy, which includes spending up to £16m on a national 5G innovation network to trial and demonstrate 5G applications. In addition, starting in 2017, the government will invest £200m to fund a programme of local projects to test ways to accelerate market delivery of new full-fibre broadband networks.

Stuart Orr, advisory partner at EY said: ‘The investment in 5G mobile technology is an important step to ushering in speeds that are up to 12 times faster than 4G, with the key benefit being the reduction of latency times or lag on the network.

‘If driverless vehicles are to become ubiquitous they require high speed networks coupled with very low latency to allow key decisions and actions to be rapidly taken, so this news will be cheered by investors in that technology. It is also important to remember that for 5G to be a real success key players from across the industry will need to collaborate closely together.’

Alex Holt, partner and head of TMT, KPMG, sounded a note of caution, saying: ‘Support from government – no matter how large or small – is welcomed. But the reality remains that major communications infrastructure operators are being asked to invest billions in the UK’s digital future in a less than certain regulatory environment, and a future where the dominant US platform businesses will reap a majority of the economic rewards from that investment.’

There was a similarly doubtful response from Patrick Imbach co-head of KPMG tech growth, who said: ‘With Ofcom, the UK regulator, wanting 5G to arrive by 2020 and operators still looking to make a return on their 4G investments you would need to question how much of an impact £16m will have?’

However, Dan Adams, lead UK partner for telecommunications at Deloitte, said: ‘5G technology will cost billions of pounds to develop, and will create tens of billions of pounds for the UK economy. A small investment now can go a long way to positioning the UK at the very centre of global 5G investment.’

Policy paper for the Midlands engine strategy is here

Report by Pat Sweet