Why investors are sounding the alarm on Sunak’s climate U-turn
Rishi Sunak’s move to ditch a host of key climate policies will have a chilling effect on the flow of cash into the country, as the US presses ahead with sweeping green subsidies for business, top investors have warned.
The Prime Minister yesterday canned a number of the government’s landmark policies on net zero, including delaying a ban on the sale of petrol and diesel cars previously slated for 2030.
The move drew the ire of top carmakers, with Ford and Vauxhall both slamming the move yesterday. Energy firm E-On also criticised the wider rowback as a “misstep on many levels”.
Top venture capital investors have now warned the drawback could scupper the flow of cash into the country, as the US forges ahead with green friendly policies rolled out in the Inflation Reduction Act.
“The UK is struggling already to attract overseas investment and is competing against government programmes around net zero in the US and EU,” Richard Burrett, chief sustainability officer at Earth Capital, told Morning Wire
“Any weakening of the policy signals by the current government will undermine much of the positive work currently being undertaken. Perhaps our government should focus on the long term interest of the UK economy rather than the next election.”
A top tech policy specialist told City A.M. that “in the race to be home to the economy of the future, investors need certainty”.
“Sunak’s announcements cast doubt over the government’s commitment to ambitious climate action whilst the US and EU are doubling down; investors will respond appropriately,” they added.
The UK has forged ahead on areas like climate tech investment, with firms raising more than $7.5bn (£6.54bn) in 2022, compared to the $4bn (£3.48bn) the year prior.
While the move to ditch the policies is not expected to have a direct effect on the industry, investors are already voting with their feet and capitalising on generous subsidies in the US as a result of President Biden’s Inflation Reduction Act.
The legislation has triggered a $278bn (£222bn) boom in new clean energy investment in the US, creating some 170,000 jobs in the process, according to environmental group Climate Power.
Despite the boom in US investment as a result of incentives for investors, Berlin and Amsterdam-based VC firm Kompas told Morning Wire that politicians could not strike the right balance.
“We need to create the right policy frameworks and align on subsidy requirements. Politicians are scared and seem incapable of developing a transition strategy that is realistic but also ambitious,” managing partner Sebastian Peck told Morning Wire
One top investment analyst played down the fears, however, saying the UK’s climate tech sector should be “broadly insulated from No10’s vacillations”.
“Cleantech startup founders and climatetech funds are run and funded by people who believe in the mission,” Henry Whorwood, head of research at Beauhurst, told Morning Wire
“In this regard, government changes look like tinkering which can really affect car manufacturers, wind farm builders et cetera. But innovators know there will be a market for their technology whether the target is 2030, 2050 or beyond.”