UK needs 'significant' overhaul of infrastructure investment to reach net-zero, report claims

The Confederation of British Industry (CBI) has claimed that the UK Government needs to "undertake a significant programme of infrastructure investment" to enable regulators and private investment to create funding for critical net-zero infrastructure.

CBI research shows that for every £1 spent on construction activity, £2.92 is created in wider value to the economy

CBI research shows that for every £1 spent on construction activity, £2.92 is created in wider value to the economy

CBI’s new report notes the need for the UK to “develop a world-class environment for private investment in infrastructure” in order to combat the economic damage caused by the coronavirus pandemic.

According to the Office for Budget Responsibility, the UK is set to suffer from a £372bn deficit in 2020-21, despite the Government’s financial relief policies, the equivalent of 18% of GDP. This economic downturn could hinder the required investment into national infrastructure to enable the UK to meet its net-zero target for 2050.

As a response, the CBI is calling for the Government to give regulators more control and targets to deliver the anticipated National Infrastructure Strategy (NIS), and have clear regulatory guidelines to support sectors with the net-zero transition.

“While the UK government’s commitment to delivering infrastructure remains undeterred, it is important to note that the country’s fiscal position has substantially worsened as a result of the Covid-19 crisis,” the report states.

“The government should require regulators to have specific regard to deliver the National Infrastructure Strategy, including progressing towards meeting the net-zero emissions target for 2050. Each regulator must have a clear responsibility to acknowledge how regulatory policy aligns with the government’s strategic objectives on infrastructure investment, including its net-zero emissions target for 2050. This would also require each regulated sector to assist regulatory decisions and reduce fragmentation between departments and regulatory bodies.”

In March, the UK Government pledged more than £600bn in the next five years on infrastructure, however, the coronavirus pandemic has weakened economies across the globe. As such, proactive policies should be put in place, the report notes, to help combat the economic downturn.

CBI research, for example, shows that for every £1 spent on construction activity, £2.92 is created in wider value to the economy. However, the World Economic Forum estimates that globally a £12trn investment gap will exist regarding the infrastructure required in 2040.

Fortunately, the green recovery could help combat the investment gap. The International Renewable Energy Agency claims that green finance could stimulate global GDP gains of $100trn by 2050, quadrupling job growth in green sectors and reducing the energy industry’s CO2 emissions by 70%.

For the UK to benefit for this transition, the CBI recommends that the government “should create an infrastructure bank, which could form part of a larger investment institution to support the UK’s economic recovery”. This would need to be implemented soon, because the UK is approaching the end of the Brexit transition period and will likely lose access to the European Investment Bank.

Additionally, the government should give greater powers and independence to the National Infrastructure Commission (NIC), enabling the body to hold the Government to account.

The NIC has recently urged the UK Government to set "clear resilience standards" that enables energy and water networks, transport, essential services and all infrastructure sectors to stress test and plan against hidden climate challenges on the horizon.

The NIC notes that future-proofing existing and planned infrastructure could spur job growth as part of a green recovery from the coronavirus pandemic. However, it warns that “the past is not always the best guide to the future” and has called for more proactive approaches to resiliency.

The Government was meant to publish the long-awaited 30-year National Infrastructure Strategy (NIS) alongside the Budget in March, but it was delayed to give chancellor Rishi Sunak more time with the strategy.

The strategy’s launch has now been mooted for Autumn this year and reports suggest that the delay will allow for changes to ensure that funding is reflective of the UK’s net-zero target for 2050.

The strategy outlines how £100bn will be spent over this parliament and investments could be used to level up regions and outline spending projections for transport and digital infrastructure.

Matt Mace



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bank | Brexit | coronavirus | green finance | green recovery | Infrastructure | net-zero | Green Policy

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