Investment gap: £400bn required to deliver net-zero transition, report finds

On the day that the Government unveiled a new Ten Point Plan to drive investment to assist with the net-zero transition, a new report from PwC has warned that up to £400bn needs to be unlocked and funnelled into green infrastructure to meet the 2050 national target.

More than half of the required £40bn annual investment lacks policy frameworks that would deliver confidence to investors that long-term returns could be generated

More than half of the required £40bn annual investment lacks policy frameworks that would deliver confidence to investors that long-term returns could be generated

Clean hydrogen, carbon capture and storage (CCS), zero-carbon transport and offshore wind are all key pillars of Boris Johnson's 10-point plan to push the UK towards net-zero emissions, which will be backed by £12bn in Government investment and aim to create 250,000 new green jobs.

Announced late last night (17 November), the Ten Point Plan aims to secure three times as much investment from the private sector by 2030. While the announcement was welcomed by green groups, some have pointed to an existing investment gap into infrastructure as a worrying omission from the plan.

A new report released today builds on this concern. PwC, on behalf of the Global Infrastructure Investment Association (GIIA), has warned that £40bn investment per year is required over the next decade in low-carbon and digital infrastructure.  This would be double the capital allocation of the UK’s Infrastructure Delivery Plan, which in 2019 called for more than £20bn of annual private investment in the energy, water and telecoms sector.

PwC’s infrastructure deals leader Colin Smith said: “The UK’s net-zero target is an important marker in addressing the global climate crisis, but reaching this ambitious milestone will require huge sums of investment - both in new technologies and accompanying infrastructure. We know the capital and the desire to invest are there, but investors tell us that some of the structures needed to harness this are not. 

“For the UK to fully succeed in its ambition, we believe Government has a critical role to play in making net-zero investment work - by creating a clear vision for investment in our power networks, buildings and industry, our transport links and digital connectivity. Clear targets will be needed for each asset class and enabling policy frameworks developed to drive confidence and predictability in revenue streams.”

According to the report, existing policy frameworks will drive low-cost investment into some key technologies that will help reach net-zero. These include regulated ownership structures for grid investment and subsidies that support renewable generation investment. 

However, more than half of the required £40bn annual investment lacks policy frameworks that would deliver confidence to investors that long-term returns could be generated.

Investment gap

PwC’s report is the latest to identify the investment gap that exists in the infrastructure pipeline.

The Green Alliance is warning that significant shortfalls in governmental approach to infrastructure policy are placing the net-zero target at risk. The thinktank’s new report has warned that a lack of “net-zero testing” applied to all government decisions will continue to promote carbon-heavy economic activity. Such cases have already been disputed by green groups, including the £27bn roads expansion programme and the Heathrow Airport expansion.

The report estimates that an £11.4bn gap in investment required to meet net-zero currently exists. The gap is predicted to grow to reach £13.5bn annually by 2022.

It also echoes findings from the Confederation of British Industry (CBI), which 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.

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.

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. It was mooted for publication this Autumn, with the delay set to allow for changes to ensure that funding is reflective of the UK’s net-zero target for 2050.

Matt Mace



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