5Conclusion
93.It is clear that the confidence of many investors has been dented by the Government’s actions since the election. The sudden, unexpected nature of many of the announcements has unsettled investors who had been used to receiving more forewarning of policy changes. There is a high risk that a hiatus in new developments has been created, pending further clarity on short- and longer-term policy. The Government removed support for renewables due to concerns about costs for consumers. But they have not set out the evidence base for this conclusion or for other decisions, and engagement with the investment community has been poor.
94.The Government has been slow to set out its new direction of policy: the Secretary of State’s “reset” speech was made six months after the election. The emphasis on gas in this speech, followed one week later by the abrupt removal of funding for carbon capture and storage have left many wondering how clear the Government’s long-term vision really is. This has led to questions about how, and whether, the Government will meet its long-term climate change and security of supply objectives.
95.Supply chain company ABB summed up the combined impact of these failings:
At best the step change in policy is indicative of a Government that is allowing short term politics to get in the way of long term policy, and at worst it is policy making without any rationale or clear intent. Either way, it is indicative of a department that has not explicitly factored in the potential impact that uncertainty has on investors when making or changing policies affecting infrastructure.125
96.It is not unusual that new Governments introduce new policies. But lessons must be learnt, not just by this Government but by future Governments, that there are ways in which things can be done without damaging investor confidence. The policy uncertainty caused by policy changes made through the first six months after the election was unhelpful, but we are hopeful that things can now begin to move in a more positive direction. We recommend that the Government should give a clear statement on policy direction by May 2016.
97.Post-Paris, and in the lead up to setting the fifth carbon budget the Government has an important opportunity to rebuild long-term confidence in the UK, by adding detail and balance to a range of issues flagged in the “reset” speech and clarifying the future growth and “opportunity” in the renewable energy and other low carbon sectors. Although it is disappointing that the UK has fallen down the global ranking in recent months, it is worth noting that we are still relatively well placed to attract international investment. In this report, we have identified the risk of an investment hiatus for new projects but we have also outlined the specific areas that are problematic and sharpened the assessment of where a response is needed. We have set out some of the steps that the Government should take if it is to restore trust, start to re-establish the investor confidence that has been lost, and begin to restore the attractiveness of the UK as an investment destination for the many global investors seeking new opportunities.
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Prepared 1 March 2016