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Green businesses have urged the government to deliver a clear green industrial strategy setting out how it intends to target policy support mechanisms, deliver positive market signals, and introduce effective regulations to drive the decarbonisation of heavy industry, or risk wiping £224bn off the UK economy by 2050.
The Aldersgate Group of leading businesses yesterday warned that without further policy support to enable emissions reductions from industrial sectors and drive the development of nascent clean technologies – such as carbon capture and hydrogen – heavy industry’s contribution to the UK economy risks being rapidly eroded as the global clean tech investment race accelerates.
The clarion call comes alongside fresh research carried out by WPI Economics on behalf of the green business group, which estimates failing to provide requisite policy support to crowd in private investment into decarbonising heavy industry could slash the UK’s total gross value add (GVA) by 5.9 per cent by 2050, equating to £224bn.
At the same time, it highlights the huge economic benefits on offer from unlocking green investment through policy support for industrial sectors, which it said could deliver economic growth right across the UK’s regions, increase supply chain security and protect 450,000 jobs and $72bn gross value added (GVA).
Philippa Spence, UK managing director at engineering consultancy Ramboll, urged the government to take heed of the warnings from businesses, arguing that more supportive policy environment “could set the UK on course to harness the myriad social and economic opportunities of the net zero transition”.
“The decarbonisation of the UK’s heavy industries has positive spillover effects across the economy, from the built environment to the UK’s energy and transport sectors, all of which benefit from local low carbon materials,” she said. “Crucially however, policy support and an attractive investment environment must be in place.”
At present, the UK’s heavy industries and their wider supply chains contribute £152bn in GVA to the UK economy, while supporting 1.4 million jobs across the country. But the Aldersgate Group said swift action from the government was vital to securing the sector’s long term future.
The research stresses that many UK industries – including chemicals, non-ferrous metals, and beverage manufacturing – start from a strong position of comparative global advantage, while the country also boasts potential to lead in the deployment of CCS and hydrogen techologies, which already boast turnovers of £1.7bn a year and are expected to grow by around 20 per cent a year over the coming decade.
But the green business group – which represent members such as BT, Aviva, IKEA, Bank of America, KPMG, Nestle and Tesco – warned there was now intense global competition for green investment spurred by the Inflation Reduction Act (IRA) in the US, as well as the major net zero policy and subsidy support package being developed by the EU.
It warned the UK was already starting to fall behind international competitors, with investment in Britain’s energy transition falling 10 per cent last year, while it rose in the US and Germany by 24 per cent and 17 per cent, respectively. Moreover, several critical sectors of the UK economy are exposed to significant trade risks as a result of the IRA, the report said.
It therefore reiterated the repeated calls from business and investors for the UK government to come up with a ambitions response to the global green investment race, including through a more robust industrial strategy, as well as measures to address the relatively high energy costs faced by industrial manufacturers, boost green public procurement, and align the domestic emissions trading scheme (ETS) with that of the European Union’s.
Rachel Solomon Williams, executive director at the Aldersgate Group, said its members wanted to harness the economic opportunity offered by the net zero transition, but they needed policy clarity to turn these ambitions into a reality that would offer huge benefits up and down the country.
“The government has made positive statements about the need for investment into UK clean industries, but is increasingly falling behind the US and other countries in backing statements up with firm policies and long-term strategies,” she said. “This new research highlights both the risks of inaction and the huge benefits that would follow tangible action.
The government has repeatedly insisted that it remains a global leader in the net zero transition, and that its approach was continuing to attract large sums of green investment. It has therefore declined to respond in kind to the IRA and the EU with major subsidy packages, arguing that it does not wish to be drawn into a shift towards protectionist trade policies.
The government was considering a request for comment at the time of going to press, although Ministers have previously indicated that further green economy support could emerge before Christmas, with all eyes now on the Autumn Statement announcement from the Treasury in November.
Over the summer reports have also suggested the government is preparing support packages for a number of automotive manufacturers and steel producers to help them fund the development and deployment of clean technologies.
However, industry groups have repeatedly called for such interventions to be informed by an overarching net zero industrial strategy, urging Ministers to provide more clarity on which projects can secure support and fast track long standing plans to deliver new CCS and hydrogen infrastructure.
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