The United Kingdom will likely need an additional £57 billion ($73 billion) in investment by 2030 to support critical industries necessary for green job growth and reducing carbon dependency. This funding shortfall was revealed in a recent report by a taskforce advising Prime Minister Keir Starmer’s incoming Labour government.
The Labour Party has allocated £7.3 billion of public funds to establish a National Wealth Fund, aimed at investing in vital sectors like ports, green hydrogen production, and gigafactories for electric vehicles and grid-scale batteries. Despite this commitment and current private capital inflows, the report identified a remaining funding gap between £35.9 billion and £56.9 billion over the next six years, as per the report.
The National Wealth Fund Taskforce, led by Green Finance Institute Chief Executive Officer Rhian-Mari Thomas, highlighted the difficulty in securing adequate investment. “Even where clear policy direction is set, offering the certainty that investors require, there will still be projects going unfunded because levels of investment risk appetite sit beyond the thresholds of commercial investors,” the report stated.
The government plans to align the UK Infrastructure Bank and the British Business Bank under the new National Wealth Fund according to another statement by the Treasury. The Treasury informed about the government’s forthcoming legislation to make the fund a permanent institution, with more details to be shared before an international investment summit later this year.
Chancellor of the Exchequer Rachel Reeves underscored the government’s dedication to driving economic growth and revitalizing the UK’s economy. “We need to go further and faster if we are to fix the foundations of our economy to rebuild Britain and make every part of our country better off,” Reeves said.
The establishment of a sovereign wealth fund for the UK has been a topic of debate among lawmakers for years. The taskforce, which includes prominent figures like Barclays Plc Chief Executive Officer C.S. Venkatakrishnan and former Bank of England governor Mark Carney, recommended that the fund use a range of financial instruments, including equity, concessional debt, guarantees, and price assurance products, while avoiding pure grants to ensure a return on investment.
Rhian-Mari Thomas emphasised the transformative potential of the National Wealth Fund, stating, “The NWF will reshape the way we approach public-private risk-sharing, providing private investors with the confidence needed to fund the technologies and infrastructure essential for growth and job creation across the UK.”
Reeves is hopeful that the NWF will attract billions in private investment, thus boosting the UK’s slow economic growth rate. Recently, she announced a series of planning reforms, including lifting the ban on onshore wind farms and creating a task force to expedite stalled housing projects.
Despite these proactive measures, economists remain skeptical about the rapid growth needed to avoid difficult fiscal decisions. Bloomberg Economics predicts that Reeves may face a fiscal gap of around £20 billion at her first budget in the autumn.