CBI to Government: Fast-track green industrial strategy or squander £57bn

The trade body, which represents thousands of businesses and hosts more than 100 policy specialists, is warning that the UK Government cannot continue to delay updating its Industrial Strategy as global competition heats up around emerging low-carbon technologies.

In 2021, the first update to the Industrial Strategy since its 2017 launch was made.

The Conservatives are now under increasing pressure from the private sector and the opposition to outline how they would modernise the strategy further if re-elected, given the pace of change in heavy industry, cleantech and digital technologies.

Domestically, Labour has set out its own Industrial Strategy principles, linking levelling up to cleantech. On the global stage, the UK is yet to respond to low-carbon industrial subsidy packages in the US and EU that are attracting international investors. This has been promised for the Autumn Statement.

The CBI has stated that businesses need a “clear and stable policy environment” as soon as possible, with both demand-side and supply-side stimulus.

It is pushing the Government to implement a net-zero stress test for all policymaking, thus avoiding the passing of decisions that will not put the UK closer to achieving its legally binding climate targets. A more orderly transition will maximise the economic opportunity and save costs relating to U-turns in decades to come, the CBI has stated.

Linked to this, the CBI is calling for a rapid review of the tax system to assess net-zero compatibility. It wants the review completed within the first year after the next general election. Through this review, the UK could launch new tax credit systems specifically for green technologies. It should also provide far more clarity on the future of carbon taxation.

The CBI report stated: “Carbon taxes – like fuel duty, VAT on fuel and corporation taxes from the ring-fenced oil and gas regime – are already declining as a share of GDP.  To ensure sustainable revenues in future, it is important to start conversations now about taxation in a net-zero world. Used correctly, tax can be a powerful and flexible tool in stimulating green growth, but it needs to be purposefully aligned with these goals for this to happen.”

This tax reform should feed into a wider investment plan for net-zero. This would set out how a combination of public sector interventions could crowd in private finance.

Clarity and efficiency

The prize for delivering the CBI’s recommendations is a GDP boost of £37bn – £57bn by 2030. This is equivalent to 1.6-2.4% of GDP. For context, the UK’s transition to net-zero is estimated to cost around 0.5-1% of GDP, per the Climate Change Committee’s estimates.

CBI director-general Rain Newton-Smith said: “If we needed any further proof that green growth really is the economic opportunity of the 21^st century, then a potential £57bn boost to the economy provides just that.

“Not only does it offer hope for lifting the current economic gloom, but it can deliver a path to sustained growth for years to come – all while providing vital protection to our environment, improved energy security and increased prosperity across the country.”

Newton-Smith is here quoting the conclusions from Chris Skidmore MP’s Net-Zero Review. The Review was commissioned by Liz Truss to identify a pathway to the UK’s climate targets that maximises the economic opportunities.

Many of Skidmore’s top-line recommendations mirror those of the CBI. He is also advocating the creation of a new arms-length Government body tasked with overseeing inter-departmental collaboration on the transition, ending years of ‘siloed’ climate-related policymaking.

The CBI is also aligned with Skidmore’s calls for more sector-specific and technology-specific clarity from the Government. This can help the private sector to make investments at the appropriate times, and of suitable scales.

Decarbonising heat is among the areas of confusion at present. CBI members are advocating for more clarity on the phase-out of gas heating in homes, given that current policies are not sufficient to accelerate heat pump deployment in line with Government targets – and given that a decision on the role of hydrogen in home heating is not due until after the election.

Related article: UK ‘risks missing out on £230bn opportunity’ without refreshed industrial strategy

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