With a new Government in place and laser-focused on revitalising the UK economy, the time is now for a comprehensive economic strategy centred on the net zero transition.
The Prime Minister and Chancellor have acted quickly in pursuit of economic growth, launching the National Wealth Fund and GB Energy as flagship initiatives. This forward momentum is welcome, but the Government must go further to signal a new era in economic policy. Strategic public investment, delivered via the National Wealth Fund, must be rapidly embedded in a comprehensive plan to get the UK back on track to net zero and accelerate the investment required to transform the economy and create the jobs of the future. The UK needs a Net Zero Investment Plan.
The economy that the government inherited is built on shaky foundations. GDP is just 1.8% above pre-pandemic levels (compared to 3.6% in the EU and 8.6% in the US), and UK productivity is now lower than in France, Germany and the US, primarily due to a lack of investment in capital and skills. UK companies have invested 20% less than those in the US, France and Germany since 2005, placing Britain in the bottom 10% of OECD countries, and costing the economy 4% of GDP. This has translated into stagnant incomes.
While the ‘securonomics’ and political stability offered by the Chancellor as part of the government’s message to investors is welcome, a step change will be required to transform the UK’s economic fortunes. This shift must be centred on the net zero transition and the economic opportunities it offers investors and local communities alike. Last year the green economy grew at 9% whilst the rest of the economy stagnated. Official assessments estimate the potential benefit to the UK economy of meeting its net zero targets would be £266 billion over the next 30 years. The case is clear – the transition stands to unlock innovation, create hundreds of thousands of skilled jobs and ensure energy security across the country.
The role of the National Wealth Fund
Decisive leadership from the Treasury is needed for the UK to capitalise on this once-in-a-generation opportunity, while meeting the government’s goal of the UK becoming the fastest-growing economy in the G7. As the National Wealth Fund Taskforce recently identified, to achieve net zero and transform the UK economy, a sustained annual investment of £50 billion per year from 2030 through to 2050 will be required. While the majority of this will be provided by the private sector, catalytic public investment via the National Wealth Fund will be an essential pillar of the government’s approach.
To kickstart the UK’s economic engine, this Fund must be established to work effectively with the existing public finance ecosystem, with a clear mission and mandate to provide clarity to the market. This mission must be centred on delivering targeted public investment to crowd in private investment into the green growth industries of the future.
Securing long-term growth with a Net Zero Investment Plan
To meet this sizeable task, the National Wealth Fund cannot operate in isolation and must be part of a wider strategy to drive investment into the green economy. As private sector voices have repeatedly emphasised, the new Government must send a strong signal to business and investors by committing to deliver a full Net Zero Investment Plan in the Autumn Budget.
Until now there has never been an official assessment to calculate the net zero investment gap, or set out the investment policies to fill it. Previous government policy has been arbitrary, inadequate and uncoordinated. For the UK to reclaim its place as a world-leading hub for green investment, investors must see a consistent strategy from the government, underpinned by a coordinated programme of regulation, policies and incentives.
A Net Zero Investment Plan would provide a comprehensive and regularly iterated investment plan sector-by-sector, developed in partnership with industry, to drive Labour’s Industrial Strategy. This would also enable the identification of investment gaps and opportunities to ensure that public investment is strategically targeted to address market failures.
The UK stands at a critical turning point and must urgently recognise the economic rewards that the net zero transition offers. Through delivering catalytic public investment as part of an economy-wide Net Zero Investment Plan, the Chancellor can signal to investors that Britain is open for business, with a credible and clear strategy for financing net zero and supporting the green industries of the future. Britain’s pathway to sustainable growth is green, and the time is now for a bold and comprehensive investment plan to repower the British economy.
