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UK Green Investment Must “Crowd in” Private Sector

The Institute for Public Policy Research (IPPR) has urged the UK government to commit to a long-term green industrial strategy by creating business and regulatory certainty in the sector. In a report released ahead of a general election on 4 July, the think tank said the next government should “lead from the front” by delivering high-quality public investments to crowd in private sector funds – especially in industries such as electric vehicles and renewable energy. “If the economy is an engine, then investment is its fuel, and the UK’s dire productivity performance is the single biggest driver of our dire living standards,” said George Dibb, Associate Director for Economic Policy at the IPPR. “Without resources flowing into new investment, it’s hard to see how UK economic performance can improve. The government needs to take the lead by developing a green industrial strategy and show businesses that the UK is a secure, sensible and stable place to invest.” The calls came as part of the IPPR’s latest analysis of OECD figures, which showed that investment by private companies in the UK was the lowest among G7 countries for the third consecutive year. The country was 28th out of 31 OECD countries for business investment, and has ranked lowest in the G7 for 24 of the last 30 years for overall investment – including public, private, household and non-for-profit investments. “Public sector investments in education, infrastructure and healthcare are needed to create the right conditions for growth,” the report noted. Alongside committing to a long-term green industrial strategy, the IPPR recommended reviewing fiscal rules to address volatility and constraints on productive public investment, and establishing public investment benchmarks setting out explicitly how much is needed to achieve government goals. “This paper confirms policy uncertainty as a key blocker to the flow of private investment in the UK. To see it score so poorly in comparison to every other nation in the G7 should come as a wake-up call to policymakers,” said James Alexander, CEO of UKSIF. “We only need to look at the uncertainty and indecision around renewable energy or electric vehicles, key potential areas of future growth, to see why the UK is suffering comparatively. Investors want clarity and certainty, and UK policymaking has not done enough to provide it. We must quickly act to take down the barriers to private investment.” Alexander cited slow planning permission, insufficient grid connectivity, and unclear rules of engagement between public and private capital for projects such as gigafactories as examples of key impediments. “[Remove those], and we can start to catch up with our G7 neighbours,” he added.

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