How worried should Ed Miliband be about the CBI’s net zero U-turn?
Is the CBI’s about-face on the cost of net zero a case of shameless opportunism or an overdue conversion to common sense, asks James Ford
We are arguably living in an age of screeching political U-turns. The government’s abrupt volte-face over withdrawing the Winter Fuel Allowance is probably the most egregious example. Others would include Reform’s conversion to higher welfare spending and the Lib Dems sudden openness to amending the ECHR. But, last week, a much quieter one-eighty was being executed just off Trafalgar Square. Rain Newton-Smith, the CEO of the Confederation of British Industry (CBI), used the organisation’s annual National Business Dinner to take aim at the government’s net zero agenda. If Ed Miliband felt a sudden sharp pain in his back, it was from the country’s biggest business organisation brutally sticking a knife in.
Some readers might be tempted to shrug at this news. A business lobby group urging action to reduce business costs is surely more ‘dog-bites-man’ than ‘man-bites-dog’ when it comes to headlines. But the CBI has, hitherto, been one of the biggest cheerleaders for the net zero agenda. The business group’s own website includes a campaign called ‘Accelerating to Net Zero’ that urges business and government to go further, faster on net zero and stating: “net zero cannot just be an ambition: it is a strategic necessity.” As recently as February the CBI published a report which described the net zero economy as a “powerhouse of job creation and economic expansion” that has grown by 10 per cent since 2023.
What, then, is behind the CBI’s sudden, dramatic conversion to net zero scepticism?
The CBI seems to have belatedly realised that the government’s net zero zealotry comes at a very real cost to its own members. According to Rain Newton-Smith’s speech at the dinner, the energy costs faced by UK firms are 50 per cent higher than those of companies in France and Germany and four times higher than those in the US and Canada. Over the past three years, 90 per cent of British firms have seen their energy bills rise, with a third of those seeing a rise of over 50 per cent. Four out of every 10 firms say they are cutting investment as a result. It seems that, if you want to both have your cake and eat it on net zero and energy security, someone has to pay the baker.
This should not have come as such a surprise to the CBI. Other business groups have long been warning about the impact that the net zero agenda has on company margins. A survey by the Federation of Small Businesses (FSB) published last month found that just 25 per cent of SMEs think their own business will meet net zero by 2050. Only 13 per cent of small businesses surveyed said they had the financial resources needed to decarbonise and 33 per cent said green investments take too long to pay off.
The CBI is late to the party
The CBI may well be late to the party when it comes to realising that net zero comes at a price because its membership skews towards larger firms (unlike the FSB which, as the name implies, champions the interests of SMEs). Research by the British Chambers of Commerce (BCC), another business group whose membership is dominated by smaller firms, uncovered a real divide even amongst SMEs over enthusiasm for tackling climate change. Amongst businesses with more than 50 employees the proportion with a recycling target was 50 per cent and those with an energy consumption target was 45 per cent but for firms with fewer than 50 staff (micro businesses) the rates dropped to 35 per cent and 25 per cent respectively. A British Business Bank study in 2021 estimated that three in four smaller firms were yet to implement comprehensive decarbonisation targets.
Of course, it remains to be seen how profound and deeply held the CBI’s shift in position over net zero will be, and if it will have any impact upon government policy. The CBI press office may simply have oversold a minor course correction as a Damascene conversion to secure better coverage in a busy news week. But, if this speech is indicative that misgivings about the cost of net zero are spreading from the shop counter to the boardroom, then it could mark a huge shift in the plate tectonics of business opinion. In which case, Ed Miliband should be worried. Very worried.
James Ford is a public affairs consultant and former advisor on transport, environment and technology policy to then mayor of London Boris Johnson