13 February 2024 - Labour's decision to ditch its £28bn manifesto pledge creates yet more uncertainty for green businesses, writes Beverley Cornaby, Director of the UK Corporate Leaders Group.
First published by BusinessGreen on 09 February 2024
There are times when you wake up and really wish you hadn't seen the news, as you know it's going to make for a challenging day. The main UK headline "World's first year-long breach of key 1.5C warming limit" sat alongside yet another reversed climate policy - this time the £28bn green investment manifesto pledge from Labour, which has now been ditched.
While the main headline story depressingly set out how seriously we need to take the climate crisis and the need for urgent action to avoid the worst impacts of climate change, Labour's decision raises even more questions of the political will to tackle climate change. Labour may insist they remain committed to realising their green investment plan to some extent. However, this lack of consistency through rolling back on the value of it follows a period of reverses and inconsistent rhetoric on climate policies from government. This creates yet more uncertainty for business and could further impair the UK from gaining significant private investment.
Former Conservative MP, Chris Skidmore set this out in his own government commissioned independent review of net zero that there are economic opportunities for the UK from the transition to net zero, but these opportunities will only be realised with a concerted effort now. He highlighted the importance of government in setting out the Net Zero Strategy and providing the "certainty, clarity, continuity, and consistency" needed to drive green growth. This message is echoed by business. Just in November, UK businesses wrote to the Chancellor calling for a ‘a coherent, proportionate, and robust response to the global race to net zero'; this followed a call from businesses in the summer calling for ambitious action on net zero from government.
In spite of these calls to government for more consistency and ambitious action, the last year has seen business trust in government to deliver against its net zero target severely dented. Policy reversals have included scrapping minimum EPC standards for rental properties, the ban on new oil and gas boilers delayed, and the ban on sale of diesel and petrol vehicles delayed, plus the latest news that they are considering reversals on green heating policies. These decisions followed the Climate Change Committee stating that the UK had lost its clear global leadership position.
At the same time as this inconsistent decision making from the UK government, other governments around the world are stepping up. They are creating incentives that are driving significant investment in green technologies on their own shores, further highlighting the gap in UK investment and growth strategy to ensure the UK remains a global climate leader. Reports demonstrate how much the US Inflation Reduction Act is driving private investment with companies announcing over $110bn in the first year. While the EU's Green Industrial Plan has already unlocked $45bn additional financing from the European Investment Bank through its own plans and seeks to use that to unlock further private investment.
With these incentives offshore, the longer the UK leaves it to set out a clear investment strategy, there is a risk the UK will lose its competitive edge to attract similar investment. Previous investment plans from the UK, for example, the former Prime Minister, Boris Johnson's Ten Point Plan for green industrial growth, did in the short term begin to unlock private funding, with £6bn secured in the first year. However, there was a consistency in rhetoric and support at the time. This was due to the UK hosting the COP26 Climate Summit in Glasgow that promoted, enabled and supported this private investment. There is no such current, clear, long-term plan around which the UK is driving green investment.
While it is not clear what the Ten Point Plan ultimately delivered in terms of private investment, if there is a key learning from it that Labour could take away, it is that the exact figure may not matter. Business may not recall how much funding the Ten Point Plan pledged from government. What mattered was that the plan set out a clear direction, providing the certainty, clarity and consistency for businesses and investors, behind which investment could flow. The current government could also learn from this.
We know that to avoid the worst impacts of climate change, significant levels of investment are going to be needed in the UK. Just to adapt to climate change this figure is £10bn a year. However, to ensure the UK meets its net zero targets it is currently estimated that an additional £50bn to £60bn of capital investment will be required each year, and that is not including between £44bn and £97bn of investment needed over 10 years for delivery of domestic nature-related goals.
These are significant numbers, but with the right plans in place that business and investors can get on side with, these levels of investment are not impossible to unlock, as the US in particular has shown. As such, what is needed now, from both parties, are clear green investment strategies that provide clarity and certainty that business and investors can get behind. This is the opportunity of the century, and the UK needs to act now to avoid it costing more later.
