CBI chief: green growth could add £20bn to UK economy

Posted on 5 Jul 2012 by Chris Flynn

The Confederation of British Industry has called for politicians to adopt a smarter, more consistent approach to energy and climate change policy in a report released today.

John Cridland, CBI director general
John Cridland, CBI director general

CBI director general John Cridland has insisted that the government does not have to choose between green business and growth, in a speech to launch the report, The colour of growth: maximising the potential of green business, at law firm Bird and Bird LLP in London today.

The business group suggests that with the right policies the green economy could add £20bn to UK GDP by 2015.

According to the report, the global green market is valued at £3.3tn. The UK accounts for £122bn of this, which is around 8% of GDP. UK green businesses employ 940,000 people and their contribution to exports could potentially cut the UK’s trade deficit in half by 2015.

Mr Cridland said that the green economy goes hand in hand with rebalancing the economy, boosting business investment, increasing exports and nurturing high growth of mid-sized businesses. Before it can combine with growth, however, there are three challenges to overcome.

The first of these challenges is confidence, according to Mr Cridland, who said: “The government needs to be consistent in its actions because uncertainty is not breeding market confidence. Given current economic realities gaining investment asks for a lot of investors, but without confidence businesses cannot achieve these funds. Consumer confidence is also at a low and we need to overcome this.”

He continues: “The second challenge is complexity. There are now 12 carbon taxes, many of which are poorly perceived by business. Someone needs to step back and untie the knots so that we can get a much better energy efficiency policy.”

Mr Cridland considers the third challenge to be competition. “There do not have to be losers in green growth. Companies who are doing their bit will be vulnerable if policies are wrong. In other countries these kinds of companies are offered support, in the form of tax relief. We need a strategy to work out how we can help companies beyond what they are already doing.”

He explained what the solutions to these challenges could be: “We need clear European policy on the green economy and statements on what the green economy will look like in 2030, we need a thoroughly thought through solution to domestic policy that needs to be put in place immediately, and we need a full explanation of the future costs for green companies.”

The CBI report offers 10 recommendations for government on green business:

  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • Reflect the value of all sectors in the economy: Develop a long-term strategy for energy-intensive industries, including the further roll out of realistic sector-specific decarbonisation roadmaps, which will enable them to play their part in the low-carbon transition.
  • Build upon the UK’s strengths: Play a more proactive role in aligning policy and investment with existing UK strengths, and promoting these abroad.
  • Capture greater value from green investments: Identify strategic opportunities to develop domestic capabilities through targeted interventions and longer-term technology road-mapping.
  • 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.
  • Develop our “intellectual infrastructure”: Continue to support the UK’s strong innovation ecosystem, and address strategic skills shortages.

Speaking at the report launch, Matthew Bonnas, legal partner at Bird and Bird LLP, said his green business clients are put off making deals because of the uncertainties over climate change policy.

Steve Sharret, chief executive of green technology developer Bio Group, said: “On a simplistic level the government must come out and champion the low carbon economy, this does not cost them anything.” He added: “The CBI report is timely and important.”

Mr Cridland concluded: “In the search for growth we are digging for goldmines, green growth is one of them.”