UK government ‘inconsistent and opaque’ in its approach to transport decarbonisation

More than half of major transport companies are or plan to move out of UK to a market more supportive of sustainability goals

The Prime Minister Rishi Sunak and the Chancellor of the Exchequer Jeremy Hunt visit the Nissan factory in Sunderland where they met with the Chief Executive of Nissan Makoto Uchida, other senior executives and workers in the plant. Picture by Simon Walker / No 10 Downing Street


Michael Nelson

The UK Sustainable Investment and Finance Association (UKSIF) has accused the UK government of being at risk of creating an “investment hiatus” in the transport market, leading to a flood of private capital being driven overseas.

In Financing the Future: Transport – part of a series of research and policy papers looking at practical and cost-effective policy reforms required to unlock investment in the UK’s highest carbon-emitting sectors – UKSIF calls on the government to provide greater clarity on the long-term strategy to decarbonise the transport industry.

The government’s “inconsistent and opaque” approach, it goes on to say, is in stark comparison to other international policies such as the US Inflation Reduction Act, which provides potential investors with easily identifiable rules of engagement.

Unless the government can provide a clear process for investors, UKSIF warned the UK would continue to fall behind and be unable to compete on the global stage for battery production.

James Alexander, CEO at UKSIF, said: “A lack of clarity and certainty on the long-term strategy for the automative sector, is destroying investor confidence, driving much-needed private capital to the international market and limiting necessary progress on the decarbonisation of the transport sector.

“Without certainty from policymakers on targets or transparency on the approach to private partnerships, manufacturers and investors find themselves in limbo – questioning how or why to invest in this sector, and the long-term strategy for UK transport.”

Growing global competition

UKSIF research shows 87% of the UK transport sector – representing approximately £150bn in UK investment – agreed that providing a consistent approach to government partnership with investors, including producing investment prospectuses for gigafactory sites, would have a positive effect on investment into the UK.

Clarity of direction and a concrete roadmap for public-private engagement is the missing element in the equation, according to UKSIF, which is currently keeping private capital away from the UK’s gigafactory ambitions against the backdrop of global competition from the likes of the US and Germany.

The research, which surveyed 100 businesses across the transport sector, also highlighted the opportunity cost of not pursuing a more transparent and consistent policy approach. More than half (57%) of major transport companies said they have or plan on moving investments out of the UK to a market that is more supportive of their sustainability goals.

Alongside greater transparency on general rules of engagement around private partnerships, UKSIF also called on the government to produce an investment prospectus for identified sites, which sets out the key opportunities, and the level of support investors can expect the government to provide. This support could come in the shape of subsidies, and providing longer-term certainty for investors that they can access energy at a comparable cost to other international markets.

Failing to invest in home grown talent

The paper also highlighted what it described as a “failure to seize the opportunity to level up and facilitate investment” in areas across the breadth of the UK, moving far too slowly on promoting and incentivising the growth of a domestic battery manufacturing industry despite a stated ambition for the UK to be a ‘world leader’ in the battery value chain.

81% of survey respondents agreed that targeting locations with existing, skilled workforces in the energy industry and automotive industry, alongside securing pre-application planning approvals, would be an impactful policy change for companies investing in sustainable and green transportation.

Therefore, the paper calls on the government to direct its focus on target locations where skilled workforces are already in existence or can be repurposed. For example, working with local partners in regions where skilled workforces are thriving, to grant these special economic status to attract gigafactory investment. These target locations should include Scotland, specifically Aberdeen, and the West Midlands, including Coventry, as well as the North East.

“The government’s failure to invest in our home-grown talent and boost investment in areas such as the West Midlands, where a skilled workforce in the automative industry already exists, risks creating a skill shortage that could see us fall even further behind,” added Alexander.

“The UK is in desperate need of consistent policy, backed by ambitious targets to retain its powerful position as a world leader in sustainable finance and innovation.”

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