The UK has five years to secure investment in green industries or risk missing out forever, according to think tank Onward’s latest report.
With manufacturing jobs concentrated in “left behind” areas, the report added that failing to secure green investment would further “devastate” industrial communities and cause political problems for the government in vital “red wall” seats.
“If the government fails to secure these green factories, then they will go to the UK’s competitors in Europe, the United States and Asia,” the report said.
In some sectors, the UK could have even less than five years to secure investment, according to the researchers behind the report.
Given current building project timelines, Onward said it expected most European EV and battery factories would be built by 2030, ready for the likely peak in demand. However, with such plants taking around five years to build, investment decisions need to be made in the next two years.
“The UK must secure investments in EV and battery manufacturing by 2025 or risk the UK’s car manufacturing industry shrinking significantly,” the report stated.
The team behind the report highlighted the action that European governments have taken to boost their green manufacturing sectors, such as offering cash incentives for battery manufacturers to build plants in their countries.
For example, Hungary has offered around £172m of investment aid to Korean firm SK Innovation, while Poland has offered LG Chem around £82m. In the US, Tesla benefited from $465m (£375m) in low-interest loans from the government as an incentive to build its main factory in California.
“The green industrial revolution is a big risk for UK factories that make cars and steel and for workers in the UK’s oil and gas industry,” said Ed Birkett, head of energy and climate at Onward.
In order to get ahead of the curb, the Onward report recommended exempting green manufacturing firms from business rates, reducing electricity bills for heavy industry and introducing “local content” targets for green technologies.
The report also called for the UK to introduce a carbon border adjustment mechanism (CBAM), which taxes imports according to their carbon content and prevents emissions from being “offshored” – similar to the one that has received a provisional agreement from the EU.
The measure was also supported by the House of Commons Environmental Audit Committee, leading the government to agree to a consultation on the matter.
The Onward report has been backed by 24 Tory MPs, including former communities secretary Simon Clarke.
“We must find ways to reduce the high energy prices facing energy-intensive industries like the UK’s steel industry,” Clarke said. “I have seen for myself the transformative potential of new green industry in the Tees Valley, and I want to see this replicated across the UK.”
In response to the report, a spokesperson for the Department for Business, Energy and Industrial Strategy said: “The government is supporting green manufacturing industries by investing and leveraging billions across the renewables supply chain, backing Britain’s automotive sector through new gigafactories and increasing relief for energy-intensive industries’ electricity costs to ensure sectors such as steel remain competitive.
“Thanks to government support, manufacturers are continuing to invest, including in the automotive sector with Ford announcing just this month that they would be investing a further £125m in Halewood to build their first EV component site in Europe.”
Investment in green manufacturing could potentially help future-proof the industry, which shrank by 10 per cent last year, with turnover falling by 9.2 per cent, according to figures from the Office for National Statistics (ONS).
The majority of manufacturers linked lower production to a reduction in new work intakes, according to S&P Global. Many organisations also reported many instances of expected orders being postponed or cancelled, due to factors such as rising uncertainty, high transportation costs, longer lead times, inflationary pressure, and the cost-of-living crisis.