Sunak’s government ‘going backwards’ on green economy, says CBI

4 months ago7 min

Rishi Sunak’s government is “going backwards” on building a greener economy and lacks a growth plan to soften the blow from recession, the head of the UK’s leading business lobby group has said.

Tony Danker, the director general of the Confederation of British Industry (CBI), said the prime minister’s lack of ambition for the low-carbon economy was leaving business bosses “confused and disappointed” after the progress made under Boris Johnson.

Arguing that the government lost its “biggest champion” in cabinet for green economic growth when Johnson left No 10, Danker said: “In crude terms, most of business thinks the government is going backwards on green, having gone forwards over the past five years.”

He said this was leading to “genuine and widespread concern” in company boardrooms across the country, because bosses believe the low-carbon economy of the future is one area wherer Britain could become a world leader.

Warning that a “competitive prize” was being put at risk, Danker said firms wanted more action from the government on carbon capture, sustainable finance in the City of London, onshore wind and investment in renewables. “The government is strangely silent and reticent for all the levers for green growth.”

Danker said failure to encourage business to invest in green projects and other productivity-enhancing schemes was weighing on the prospects for the British economy.

Publishing a downbeat assessment in its latest economic forecasts, the CBI said Britain in 2023 would remain beset by high inflation, weak economic growth, low business investment and chronic worker shortages.

Reflecting higher taxes, a squeeze on household incomes and a weaker growth outlook, it said business investment at the end of 2024 was on track to remain 9% below the level in December 2019, before the Covid pandemic struck.

Danker said: “The country does not have a plan for growth. There are lots of ominous signs about recession and headwinds. What we’re lacking is any sense of reason to believe in investment confidence, or a market framework for growth, coming from government.”

Jeremy Hunt used his autumn statement speech last month to argue that Britain could take advantage of “Brexit freedoms” to cut regulations in five key growth industries: digital technology, life sciences, green industries, financial services and advanced manufacturing.

However, the chancellor also confirmed that the headline rate of corporation tax would rise by six percentage points, from 19% to 25% from April, and that the government’s “super deduction” investment relief programme would end.

Aiming to restore investor confidence in the government after Liz Truss’s disastrous mini-budget, Hunt suggested that higher taxes should form part of the plan to show Britain can pay its way, while prioritising financial stability and bringing down inflation as preconditions for economic growth.

The head of the CBI said company bosses understood the government’s aims but he warned there was a danger that firms would pull back from investing in Britain without a more robust plan for growth from the government.

“We shouldn’t be trying the Liz Truss and Kwasi Kwarteng formula for growth, ie let’s cut everyone’s taxes and boost consumption. But we should be trying to boost business investment.”

The CBI said chronic shortages of workers required a more flexible immigration system, as well as more investment in education and training. It called for the de facto ban on onshore wind to be scrapped, and for the government to offer companies tax relief on productivity-boosting investments.

It comes with the economy expected to have already fallen into a recession in the third quarter of this year, when GDP shrank by 0.2%. The business group said it expected the recession to last until the end of 2023, with high levels of inflation, alongside falling business investment from the middle of the year and a year-long decline in consumer spending.

Danker said: “It’s important that Britain finally grapples with business investment. I think Rishi Sunak gets that. Business recognise that. And yet we don’t have a strategy for it.”

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Sunak’s government ‘going backwards’ on green economy, says CBI