The UK needs to “move at speed” with renewable energy to boost energy security independence and cut bills, according to UK Prime Minister Keir Starmer.
His comments were meant to be a taster ahead of the eagerly awaited spring statement from Chancellor of the Exchequer Rachel Reeves, who is in charge of the UK government finances – but as it happens, they were the only reference to energy throughout proceedings in the House of Commons today.
The Chancellor’s half-hour statement made repeated references to global uncertainty as the main reason for the UK’s ongoing economic challenges. Trading patterns “were becoming more unstable,” but there was nothing specifically on broader energy policy, much less on specific technologies such as hydrogen or carbon capture and storage.
The muted reaction is a blow for UK trade body ADBA (the Anaerobic Digestion and Bioresources Association) which had urged the Chancellor to back the anaerobic digestion sector, ahead of the statement.
The country’s Office of Budget Responsibility (OBR), which provides official scrutiny and analysis of UK government finances, cut its UK growth forecast from 2% to 1% this year, although one positive was inflation, which is forecast to fall to 2.1% in 2026. The OBR stated UK productivity performance, interest rates and global trade policy remain outstanding risks and the economic and fiscal outlook are more challenging than in October, with output stagnating.
Source: Office for Budget Responsibility
Source: Office for Budget Responsibility
In a bid to spur growth and security, the Chancellor sought to deliver on defence spending and economic development with one budget allocation.
An additional £2.2bn will go to the Ministry of Defence in the next financial year, to support tech firms and startups develop new technologies such as AI and drones. Overall, a further £13bn of capital investment was pledged, over the course of the current five-year parliamentary term, with this being year one.
Tom Clougherty, Executive Director of the Institute of Economic Affairs, said the UK’s cycle of fiscal events “feels a lot like rearranging the deckchairs on the Titanic”.
“Turning increased defence spending into an exercise in ‘modern industrial strategy’ suggests that the government still has too state-centric a view of economic growth – one that is almost certain to disappoint in the long-run,” he said.
“Ultimately, we are going to need much more fundamental reform – going further and faster on the deregulatory, supply-side measures the government has begun to talk about; lifting the self-defeating burdens that have been imposed on business; and taking a long, hard look at what the state does and how it is funded.”
A full spending review will be announced on 11 June, and the main forward-looking financial calls in the country’s annual Budget in the autumn.
Despite the energy omissions from the statement, the UK’s National Wealth Fund announced last week that it would direct £5.8bn ($7.5bn) of funding towards green hydrogen, green steel, carbon capture, manufacturing and port projects in a shift towards supporting higher-risk developments.
The Chancellor raised the entire fund’s economic capital limit from £4.5bn ($5.8bn) to £7bn ($9.07bn) to support projects that “struggle to access private finance.”
The steer will direct investment into clean energy, advanced manufacturing, digital technologies, and transport.
Caroline Bragg, CEO at the Association of Dencentralised Energy (ADE), said today’s spring statement only confirms what the whole of industry know: jobs, infrastructure and energy security must be at the forefront of decision-making.
“Securing growth in these areas will be vastly dependent on important decisions facing the energy sector over the coming years, and what’s needed to deliver on this growth is strong signals from government. More decisive action and strengthened support for our sector will mean government and industry can unite to truly deliver lower bills, champion jobs, and promote economic growth,” she said.
