New research by the UK’s leading business group shows that the UK has the ability to become a global front-runner in low carbon products and services, which could be adding £20 billion extra in annual GDP by 2015.

But the Confederation of British Industry (CBI) warns that the Government needs to take the right action to grasp this potential and avoid damaging the competitiveness of key industries.

John Cridland, CBI Director-General, said “The so-called “choice” between going green or going for growth is a false one. We are increasingly hearing that politicians are for one or the other, when in reality, with the right policies in place, green business will be a major pillar of our future growth.”

“With something like a third of all our growth accounted for by green business last year, the UK could be a global front-runner in the shift to low-carbon. In the search for growth, we’re digging for goldmines - and one of them is green,” he added.

The value of green growth

The UK grew its share of the £3.3 trillion global green market by 2.3% in real terms in 2010/11, reaching £122 billion and accounting for around 8% of GDP, and CBI analysis suggests that green business may have accounted for over a third of all UK growth in 2011/12.

Across every sector and region, green business activity now employs around 940,000 people in the UK, with two thirds of these jobs located outside London and the South East.

Green goods and services are also a strong contributor to UK trade, and the biggest links are to fast-growing economies like China, which buys 7% of UK green exports. By the end of this Parliament the contribution from green business could potentially cut the UK’s trade deficit by half.

Investing in a balanced mix of low-carbon energy sources should also help to ensure the UK’s long-term energy security and affordability by reducing exposure to global energy price rises and fluctuations.

Mr Cridland said “The UK has made a great start tapping into green economic opportunities but mixed signals from the Government are setting the UK back. If we can’t be sure that the policies of today will still be the policies of tomorrow, we simply won’t build business and consumer confidence or secure the investment we need.”

“We must cut green tape and pay attention to competitiveness. There is no need to create losers in the low-carbon transition, but at the moment we are endangering our energy-intensive businesses. If we don’t take a smarter policy approach, not only will we miss out on growth opportunities, we could also undermine the very industries that should be at the heart of our low-carbon economy.”

The CBI’s report warns that the Government’s current approach risks the UK missing out on reaching its potential. A green business slowdown could cost the UK £400m in net exports in 2014/15, and poor policy choices could further undermine sectors which are crucial to any low-carbon transition, such as energy-intensive industries.

The CBI wants the Government to build green business into any future industrial strategy. It is calling for a new approach and attitude from government which is more strategic about identifying UK strengths and maximising value from low-carbon supply chains in order to ensure sustainable growth over the longer-term.

Mr Cridland added “Good green policy has to be good industrial policy too. We should work out where we can be world leaders, and focus on building our competitiveness and getting into those supply chains.”

“There is a role for the Government to directly leverage investment in priority areas. The Green Investment Bank is a great idea, and we should get it borrowing as soon as public finances allow. But it’s not the only show in town, and green investments should also be good candidates for Treasury tools, such as credit enhancement.”

The CBI’s 10 recommendations to Government on green business are:
1.The UK must maintain its ambition: Ensure that the ambition of the 4th Carbon Budget is maintained, if underpinned by a smart policy framework which follows the recommendations of this report, and matched with consistent messaging from all parts of government

2.Play a strong role in Europe and internationally: Be at the forefront of shaping the future of the EU Emissions Trading Scheme and global climate negotiations

3.Establish clear and stable market frameworks: Ensure that market signals - particularly within the reformed electricity market - have stability and longevity, with any adjustments made in a pre-defined way

4.Stimulate new consumer markets: Work collaboratively with business to ensure the right mix of incentives and regulation, together with clear and consistent information, are in place to drive demand in emerging markets such as the Green Deal

5. Cut “green tape”: Reduce complexity in the existing low-carbon policy landscape, including immediate action on the Carbon Reduction Commitment, and take a more strategic approach when developing future policies

6.Reflect the value of all sectors in the economy: Develop a long-term strategy for Energy-Intensive Industries, including the further rollout of realistic sector-specific decarbonisation roadmaps, which will enable them to play their part in the low-carbon transition

7.Build upon the UK’s strengths: Play a more proactive role in aligning policy and investment with existing UK strengths, and promoting these abroad

8.Capture greater value from green investments: Identify strategic opportunities to develop domestic capabilities through targeted interventions and longer-term technology road-mapping

9.Facilitate the flow of finance: The Green Investment Bank should have the power to raise funds from the capital markets as soon as is fiscally possible. Priority projects should also be eligible for direct government intervention in the short-term

10.Develop our “intellectual infrastructure”: Continue to support the UK’s strong innovation ecosystem, and address strategic skills shortages