Rishi Sunak’s recent King’s Speech including commitments to extend oil and gas licensing, following on from the net zero rowbacks in September, are clear signs that this Government is drawing new political dividing lines which threaten the UK’s net zero credibility. What has not changed is the strong business and voter consensus that green growth is Britain’s ‘economic opportunity of the 21st century’.
UK business and financial institutions stand ready to partner with government to unlock the investment required to deliver net zero. However, business confidence is bruised amidst backsliding on existing commitments like the 2030 electric vehicles target. Government must deliver clarity and ambition in the upcoming Autumn Statement, building on the pledges of the Green Finance Strategy, to unlock investment in the UK’s future.
What is at stake?
With concerns over fiscal responsibility and the cost of living, it is critical that the UK offers a clear and coherent plan to deliver green growth. The government’s own impact assessments indicate that the potential benefit to the UK economy of meeting its net zero targets is £266 billion over the next 30 years.
The net zero transition will unlock innovation, hundreds of thousands of skilled jobs, and deliver energy security. The UK’s commitment to becoming the world’s first net zero-aligned financial centre was groundbreaking; now it must be matched with similar ambition on delivery.
The UK is in a race against time to attract investment and seize the opportunities on offer, as international competition intensifies. Biden’s Inflation Reduction Act is expected to cut emissions by 40%, while reducing the US deficit by over $300bn – demonstrating the significant rewards of decisive government action to spur green growth.
This makes Rishi Sunak’s net zero rowbacks a retrograde step. Ford’s critical response to the Prime Minister highlighted that business requires “ambition, commitment and consistency”, all of which have been undermined. At a time when the EU, France and Singapore have also intervened to provide clear signalling to investors, the UK cannot afford to fall behind.
But all is not lost. The Climate Change Committee estimates that Britain’s net zero transition could yet deliver up to 725,000 jobs. It is imperative that the Chancellor uses the upcoming Autumn Statement to reaffirm the UK’s net zero leadership.
Why a Net Zero Investment Plan
Leading UK private sector institutions, representing over £10 trillion AUM, have called on Government to provide them with the confidence they need to invest, through delivering a Net Zero Investment Plan. Government must capitalise on this eagerness to support the net zero transition and provide:
High quality climate information – independent tracking of financial flows:
Investment planning relies on understanding where investment gaps and opportunities lie. Detailed roadmaps must be informed by transparent and independent tracking of financial flows. This will provide a real-time picture of UK progress towards net zero, identify sectoral investment gaps, and help government build and update plans with the confidence of financial markets.
Investors and government would benefit from regular, independent data on where private finance is successfully being leveraged, and where market barriers are preventing investment. This analysis would free officials to focus on delivery, brokering a new era of strategic partnership with private finance and placing the UK at the forefront of the global race to net zero.
Enhanced Delivery – sectoral Investment Roadmaps:
The government’s existing Net Zero Strategy can only be delivered if finance is mobilised at the pace and scale required. Underpinning delivery with a package of sector financing roadmaps, predictably iterated over time, would provide clear signalling to the market about the direction of travel.
Detailed financing plans – including clarity on government policy interventions, strategic spending, and regulation – will incentivise the required level of private investment across key strategic sectors. Mapping these roadmaps onto an economy-wide transition plan for the UK would offer a comprehensive pathway to net zero, giving certainty to the market and crowding in private finance to deliver net zero in partnership with government.
The UK is at a critical turning point on its pursuit of green growth. As KPMG stated recently, large-scale investments in the industries of the future are only possible with “stable, long-term policies in place”. The Autumn Statement must therefore include a comprehensive Net Zero Investment Plan to grasp the great economic opportunity before us. It is not too late if we act now.
