British voters want the next government to seize the economic opportunities of the green transition, writes James Alexander
As we approach Thursday's election, it's clear the UK has a growth problem. Private capital isn't flowing into UK businesses and projects. Meanwhile, smaller companies have been starved of cash and faced spiking energy costs.
It's time to be honest about the ways our loss of momentum on green growth has stifled private investment into UK industry.
While politicians debate net zero, our recent polling found that almost three quarters (72%) of the British electorate want to see the next government seize the opportunities of the green transition.
Energy price spikes, like those seen since the Russian invasion of Ukraine, are a serious risk for businesses, which make it harder for them to plan for the future and harder to expand their operations.
With 40% of our electricity coming from gas, the UK is seriously and unnecessarily exposed to those price shocks. Meanwhile, the rhetoric from sustainability-sceptics seeks to position oil and gas as a stable energy source.
In the real world, if we had been in a stronger position with our domestic renewables, we would have been insulated from the global energy price spike and thereby had a competitive advantage.
Overcoming the UK's energy challenges and costly fossil fuel reliance can be solved by attracting the large volumes of private capital ready and willing to invest in these technologies. But investment in British renewables is being stifled by a policy environment that makes the UK uncompetitive. Our planning system can take up to ten years to approve a renewable energy project; enough to kill off investor interest.
The other big problem is grid connections. Our own research in February showed that almost half (44%) of energy companies had found lack of grid connections were a barrier to them investing in the UK, and UKSIF knows of multiple investors who have walked away from otherwise viable energy projects due to grid delays.
"Investment in British renewables is being stifled by a policy environment that makes the UK uncompetitive"
However, there is cross-party consensus on the status of the UK's energy infrastructure, with all major parties recognising the need for grid upgrades and streamlining planning processes for energy projects.
The Conservative party have pledged to implement the recommendations of the Winser Review which includes recommendations to fix planning and the grid. Labour's GB Energy plans seek to crowd-in private investment using public stimulus. Either one of these could be effective. Doing both would be more effective still.
Most important of all is that the next government must act urgently to redress years of stagnation.
We know action to protect the climate remains a priority for British voters across the political spectrum, even while some parties distance themselves from previous climate ambitions. Over 7 in 10 British voters (71%) said the next government must do more to protect the climate.
We're currently seeing divergent approaches to net zero targets. While the Labour party and the Liberal Democrats are pushing for accelerated timelines (2050 and 2045 respectively); the Conservative party is advocating for a more "pragmatic" approach to net zero, which has so far seen key targets such as the petrol car phase out date pushed back by five years.
Policy U-turns have changed the attitude of international investors to the UK's green industries. And all the while the US' Inflation Reduction Act continues to hoover capital across the Atlantic.
"Policy U-turns have changed the attitude of international investors to the UK's green industries. And all the while the US' Inflation Reduction Act continues to hoover capital across the Atlantic"
But net zero by 2050, like any deadline, is fundamentally an instrument of accountability requiring continuous, steady progress. That gives international investors clarity and certainty.
Describing net zero as a 'cost' is deliberately misleading, when in reality the vast majority of the investment will come from the private sector, and hitting net zero will unlock hundreds of billions in savings for the UK and help us build a world-leading economy, fit for the future.
Analysis has shown that the most ambitious approach to Net Zero could boost the UK's GDP by 6.4% - or £240 billion - by 2050, roughly equivalent to the current size of the UK's manufacturing sector.
Sustainable investment represents trillions worldwide, but as things stand the market does not consider the UK to be a competitive investment prospect. Like it or not, politicians' words and actions impact the decisions of investors, businesses and consumers day-in, day-out.
We must play to our strengths in the global green transition and give confidence to investors, businesses and consumers that the UK supports green growth and is home to the industries of the future.
James Alexander is CEO of UKSIF.
