Energy firms turning away from green investment in UK – report

British energy firms are turning away from investing in the UK and into other markets more supportive of their sustainability goals, an investment group has warned.

The UK Sustainable Investment and Finance Association (UKSIF), which brings together more than 300 members with about £19 trillion in global assets under management, said the UK is falling behind other governments in the race to become the most investible market for low-carbon energy.

As part of a report released on Monday, UKSIF surveyed 100 business decision-makers in the UK energy sector representing £700 billion in turnover on current decarbonisation challenges.

It found 63% of British firms have moved or plan to move investments out of the UK to a more supportive market.

Nearly nine in ten (87%) of UK energy businesses agreed changes to policy are essential to make the UK an attractive investment location for green energy, the poll suggested.

It also found 81% of large UK energy companies agree the UK is falling behind other countries.

In the report, UKSIF cited research from EY’s renewable energy country attractiveness index, which saw the UK drop from fourth to seventh place in 2023.

“At a time when the race to attract green finance is fiercer than ever, to be the only country that dropped in the top ten rankings (except for the Netherlands who moved from ninth to tenth) should act
as a stark warning for British policymakers,” it noted.

UKSIF said favourable policies could potentially unlock £115 billion in investment in the UK energy sector, with 96% of surveyed companies saying they would increase investment into either existing or new green projects in the UK.

The association said it has been working with its members to consider the measures needed to unlock the private capital, outlining three policy areas.

These include doing more to overhaul “the arcane and cumbersome planning and consenting rules” facing developers when trying to get a project approved.

UKSIF said the UK also needs to invest in its energy grid, saying the lack of capacity and the lengthy timeframes to connect to it are a massive deterrence for investors.

Britain should also reform energy pricing mechanisms to long-term investment in UK low carbon power capacity and ensure renewable supply chains are scaled up significantly by reforming the parameters of the Contracts for Difference auction process, it added.

James Alexander, chief executive at UKSIF, said: “An international race is under way between countries to become the most investible market for green energy and, currently, the UK is taking its leading position for granted.

“Multiple decades of arcane and archaic planning rules are putting the UK energy transition in great jeopardy.

“We are calling for practical and cost-effective measures that will advance the transition to a green economy and bring direct benefits to both consumers and the UK economy.

“Not only do we see no excuses not to accelerate these, failure to do so limits the UK’s growth potential, will continue to cause costs to consumers and threatens the UK’s position as a world leader in green finance and the undisputed financier of the net zero transition.”

Emma Pinchbeck, chief executive at Energy UK, which has echoed similar calls, said: “Reaching net zero will require an estimated five-fold increase in current investment levels by 2030 – and around two-thirds of this will come from the private sector.

“This will only happen if investors have the confidence and the right environment to justify committing funding to the UK over the long term.”

A Department for Energy Security and Net Zero spokesperson said: “We have a clear strategy to boost UK industry and reach net zero – with over 80,000 green jobs being supported or in the pipeline since 2020, and over £200 billion in public and private low carbon investment since 2010.

“We are working closely with the private sector on strategic investment – since September alone we’ve attracted nearly £30 billion for projects including renewables production, grid capacity and heat pump manufacturing.

“This is combined with the biggest reforms to the grid since the 1950s – halving the time it takes to build networks – and extra support for UK renewable energy projects, boosting the sustainability of their supply chains.”