UK Budget 2023: real estate and sustainability key highlights
Chancellor Hunt’s “growth budget” had very little in it to drive competitiveness in the future or green economy. We examine the key sustainability policies and those that were missing.
4 minutes to read
Globally we have seen an increasing level of investment, funding and incentives to support the green energy transition as the race to net zero gathers pace. The UK is at risk of falling behind, highlighted poignantly by Net Zero Review by Chris Skidmore. The March budget did very little to address any recommendations or put the UK in the leagues with other locations.
Globally, investment in the low-carbon energy transition totalled US$1.1 trillion in 2022 according to BloombergNEF. To date, 20 countries have implemented a combined 324 green incentives, 19 have 257 taxes, according to PWC.
The most notable recent move was the US’s Inflation Reduction Act (IRA) which committed US$369bn of funding for climate-related spending and clean-energy tax credits.
The EU is currently preparing a response to the IRA, which was indicated in February to be a “Green Deal Industrial Plan” based on four pillars:
• Less red tape
• Skills
• Trade
• Funding
This would add to projects within the existing Green Deal and REPowerEU, – the EU commission’s plan to make Europe independent from Russian fossil fuels before 2030. However, both are far behind China, which accounts for almost half of the total, with US$546 billion invested as of 2022, according to BloombergNEF.
The Net Zero Review by Skidmore had some recommendations for the UK’s energy transition such as a taskforce and deployment roadmaps in 2023 for solar to reach up to 70GW by 2035 and onshore wind to reach required deployment levels for 2035 net zero grid.
The budget “missed an opportunity to supercharge the country’s clean energy transition”. The subsequent £205m package for clean energy announced 16 March was not met with much enthusiasm. However, if sources are correct, a “Green Day” in a few weeks’ time may soon look to change this.
What was in the budget for sustainability?
The main budget announcement surrounded £20 billion for carbon capture solutions (CCS) to build capacity for the government’s target of capturing 20-30 million tonnes of CO2 per year by 2030, or 6-8% of total UK CO2 emissions in 2021.
According to Global CCS Institute the capacity of all CCS facilities under development globally has grown to 244 million tonnes per annum (Mtpa). In 2022 there were 30 operational, 11 under construction and 53 in development, two of which are in the UK with likely completion dates in the middle of this decade.
Skidmore recommended expediting the set-up of Great British Nuclear in early 2023 with the need of a clear roadmap on how to meet 2050 requirements. Chancellor Hunt heeded this with plans to establish Great British Nuclear to build capacity and have nuclear generate one quarter of UK electricity by 2050.
As a step, he classified it as environmentally sustainable, meaning access to the same investment incentives provided for renewable energy, and launched a competition for small modular reactors which the government will co-fund development of, if proven to be viable.
Measures for making property more sustainable
There wasn’t anything tangible. The extension on the energy price cap of £2,500 for three months will help to limit pressures on households and inflation but more was needed to boost investment into making our homes more energy efficient. Energy bills climbed by 70% in 2022, when compared to the previous year, and despite the cap this is likely to be higher in 2023 given the timing of the cap.
Knight Frank’s recent research found that annual energy costs of new-build properties, typically more energy efficient properties in higher EPC bands, were on average 56% cheaper than in existing properties. Yet figures from the ONS’ Opinion and Lifestyle Survey suggest that just a quarter of households (26%) are considering improving their home’s energy efficiency. More than one in three (36%) who were not considering making improvements said it was due to costs. Our own analysis found that the average cost to improve from EPC D or below to EPC C was £9,260 over the past five years.
Previous legislation, grants and incentives have not moved the dial. Both the UK GBC and Skidmore have made suggestions such as removing VAT on energy efficiency retrofit works, introducing variable stamp duty, and minimum energy efficiency standards for all homes to be EPC C by 2028 or 2033 – or earlier for rental properties.
There needs to be a wider systems approach of access to attractive finance through discounts or better terms to borrowers on homes meeting high levels of energy efficiency, as well as grants and loans to encourage retrofitting of homes to the scale required.
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