CBI: Green business could single-handedly cut UK deficit in half

The CBI has used its strongest rhetoric yet in urging politicians to adopt a smarter, more consistent approach to energy and climate change policy.

During a speech to mark the launch of CBI’s new report, The colour of growth: maximising the potential of green business, John Cridland, the CBI’s Director-General, made it clear that Government must realise that the it does not have to choose between going green and going for growth.

Research by the CBI shows that the UK is in a prime position to become a leader in low carbon products and services if Government embraced the market; a market that would add an extra £20 billion in annual GDP by 2015.

In his speech Cridland said: “The so-called “choice” between going green or going for growth is a false one. We are increasingly hearing that politicians are for one or the other, when in reality, with the right policies in place, green business will be a major pillar of our future growth.

“With something like a third of all our growth accounted for by green business last year, the UK could be a global front-runner in the shift to low-carbon. In the search for growth, we’re digging for goldmines – and one of them is green.

 

“Get our energy and climate change policies right, and we can add £20bn extra to our economy and knock £0.8bn off the trade gap, all within the lifetime of this Parliament.”

According to figures published by the CBI, the UK’s share of the £3.3 trillion green market now stands at 2.3 percent in real terms, accounting for 8 percent of GDP. Further CBI analysis suggests that green business may have been accountable for over a third of all UK growth in 2011/12. The business institute also predicts that green business could single-handedly be capable of cutting the UK’s trade deficit in half by the end of Parliament.

Cridland continued: “The UK has made a great start tapping into green economic opportunities but mixed signals from the Government are setting the UK back. If we can’t be sure that the policies of today will still be the policies of tomorrow, we simply won’t build business and consumer confidence or secure the investment we need.

“We must cut green tape and pay attention to competitiveness. There is no need to create losers in the low-carbon transition, but at the moment we are endangering our energy-intensive businesses. If we don’t take a smarter policy approach, not only will we miss out on growth opportunities, we could also undermine the very industries that should be at the heart of our low-carbon economy.”

CBI’s report paints a clear picture that Government’s current approach runs the risk of the UK missing out £400 million worth of net exports in 2014.15. In light of this, the CBI is calling for a new approach and attitude from Government which recognises, values and nurtures the industry.  

Cridland explained: “Good green policy has to be good industrial policy too. We should work out where we can be world leaders, and focus on building our competitiveness and getting into those supply chains.

“There is a role for the Government to directly leverage investment in priority areas. The Green Investment Bank is a great idea, and we should get it borrowing as soon as public finances allow. But it’s not the only show in town, and green investments should also be good candidates for Treasury tools, such as credit enhancement.”

In the report the CBI outline 10 recommendations to Government on green business:

1.    The UK must maintain its ambition: Ensure that the ambition of the 4th Carbon Budget is maintained, if underpinned by a smart policy framework which follows the recommendations of this report, and matched with consistent messaging from all parts of government

2.    Play a strong role in Europe and internationally: Be at the forefront of shaping the future of the EU Emissions Trading Scheme and global climate negotiations

3.    Establish clear and stable market frameworks: Ensure that market signals – particularly within the reformed electricity market – have stability and longevity, with any adjustments made in a pre-defined way

4.    Stimulate new consumer markets: Work collaboratively with business to ensure the right mix of incentives and regulation, together with clear and consistent information, are in place to drive demand in emerging markets such as the Green Deal

5.    Cut “green tape”: Reduce complexity in the existing low-carbon policy landscape, including immediate action on the Carbon Reduction Commitment, and take a more strategic approach when developing future policies

6.    Reflect the value of all sectors in the economy: Develop a long-term strategy for Energy-Intensive Industries, including the further rollout of realistic sector-specific decarbonisation roadmaps, which will enable them to play their part in the low-carbon transition

7.    Build upon the UK’s strengths: Play a more proactive role in aligning policy and investment with existing UK strengths, and promoting these abroad

8.    Capture greater value from green investments: Identify strategic opportunities to develop domestic capabilities through targeted interventions and longer-term technology road-mapping

9.    Facilitate the flow of finance: The Green Investment Bank should have the power to raise funds from the capital markets as soon as is fiscally possible. Priority projects should also be eligible for direct government intervention in the short-term

10. Develop our “intellectual infrastructure”: Continue to support the UK’s strong innovation ecosystem, and address strategic skills shortages

James Close, Lead Partner for Sustainability and Cleantech services at Ernst & Young said: “We welcome the publication of the CBI report which shows that the UK
could add an extra £20 billion in annual GDP by 2015 by becoming a global front-runner in low carbon products and services.

“According to ITEM Club, many UK corporates have strong balance sheets with increasing stockpiles of cash. The cash balances of private non-financial companies are worth over £754 billion, a staggering 50 percent of GDP, but business investment last year only increased by 1.2 percent.

“Now is the perfect time for companies to start investing in long term projects such as energy efficiency. This could include building retrofits, energy control systems or renewable power generation. The financial case is becoming increasingly appealing as renewable power becomes cheaper and energy prices are rising. As well as profiting from the investment in these programs businesses can benefit from an enhanced reputation, carbon reductions, energy price stability and security of energy supply.

“It is good news that the CBI has put a figure on the potential economic contribution of green business in the UK. To build on that we now need more commitment from business and coherent, consistent and stable policy support in this area from Government.”

The full CBI report can be read here: The colour of growth: maximising the potential of green business.