No ‘capacity’ for Ed Miliband’s warm homes plan, says British bank boss
A UK banking chief has warned the government does not have the “capacity” to meet its ambition to transition millions of homes to low carbon-heating technologies.
Nigel Terrington, the boss of specialist lender Paragon Bank, said Labour faced an “operational capacity constraint” in its bid to implement its warm home plan.
The £15bn initiative, which runs through 2030, aims to switch the heating technologies in up to 5m homes to the likes of heat pumps and solar panels. It also requires landlords in both the private and social rental sectors to bring their properties up to an Energy Performance Certificate – a grade rating a property’s energy efficiency – rating of at least C by 2030.
“We support the ambitions but question how realistic it can be for this to be achieved on time,” Terrington told Morning Wire.
He added: “You have to upgrade about 1,500 properties a day between now and 2030, and I don’t think there is the capacity in the marketplace… to do that.”
Energy secretary Ed Miliband has claimed the plan would secure the UK’s “energy independence and tackle the climate crisis”.
But it has received fierce criticism from landlords, who have branded the mandated ratings “unrealistic” and warned of a consequence on market growth.
Terrington said Paragon was “committed” to delivering its own net zero obligations by 2030, but added “one thing that has been difficult for the market… is actually understanding and knowing what the longer term strategy is, because it has changed over a period of time”.
Multiple banks have rowed back on climate commitments in the last year and delayed targets to become net zero. The net zero banking alliance abandoned operations last year after an exodus of members.
‘Pain has been taken’ on impairment charges
The bank chief’s comments came as Paragon released its half-year results where it booked a £133.2m pre-tax profit, down 4.9 per cent from the same period last year.
Income growth was wiped out by a £21.5m impairment charge, of which a hefty portion related to a cohort of property development loans underwritten in 2022 that were impacted by the sharp, post-underwriting inflation of building and labour costs and heightened interest rates.
“The pain has been taken,” Terrington told Morning Wire when asked if more charges were expected to rack up down the line.
The bank’s net interest income remained resilient, rising 2.2 per cent to £253.4m, whilst its net interest margin – a key benchmark of a bank’s profitability from lending – came ahead of management expectations at 3.08 per cent.
Paragon’s loan book grew nearly four per cent to £16.6bn, whilst its mortgage book increased 2.9 per cent to £14bn despite the added volatility from the US-Iran conflict.
“The US intervention in the Middle East has affected global and UK financial markets,” Paragon’s report said.
It added towards the end of the first half of its financial year, the conflict had “caused a generally adverse shift in economic sentiment and some market volatility.”