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gk Coronavirus reveals the unsustainability of the Government’s devolution dualism

What’s in store for the levelling up agenda now Liz Truss is Prime Minister?

GK Researcher, Tristan Robinson, investigates what’s in store for the levelling up agenda under the premiership of Liz Truss and whether tangible progress can be delivered before the next general election.  

What we know so far 

During the Conservative Leadership Contest, Liz Truss never truly went into detail as to how she’d take on levelling up under her premiership.  

She had often used the term levelling up in a “Conservative way” by focusing on tax cuts, deregulation, and devolution to boost growth. The recent not-so-’mini’ fiscal statement set out by the Chancellor of the Exchequer Kwasi Kwarteng, has given a clear indication that Liz Truss has kept with her mantra of governing in a ‘Conservative way’ – Trussonomics. The Chancellor gave no mention of levelling up in his speech but did announce the creation of new ‘investment zones’ in over 4o locations across the UK. It’s hoped that this would encourage businesses to invest by incentivising lower tax regulations and planning rules. If some of these new ‘investment zones’ were selected in areas such as Liverpool, Teesside, Newcastle and Grimsby, the financial benefits for the local areas could be significant.  

Andy Street, Mayor of the West Midlands recently outlined his support for targeted Investment Zones whilst Mayor for Tees Valley Ben Houchen called it a ‘gamechanger‘ for areas such as Teesside, helping to rejuvenate town centres such as Hartlepool and creating new high-wage jobs. Yet, it remains unknown as to how long it will take for these zones to be implemented. In addition, there is a possibility of opposition from the Government’s own backbenchers who are concerned about losing their leafy rural seats that have long been opposed to development.  

Liz Truss has also pledged to reverse the decision to downgrade the Northern Powerhouse Rail project which links Liverpool with Hull, stretching across England. During the contest she did not commit to completing the HS2 Line between the East Midlands and Leeds. It is yet unknown whether she will go through with this decision and reverse the downgrade and commit to the Eastern Leg. She also committed to Northern Research Group pledge card that aims for further devolution, a Minister for the North with direct responsibility for local growth and levelling up, the equalising of the Levelling Up Formula and introduction of two new vocational institutions in the North of England.  

Levelling up is not just about infrastructure & transport, and Liz Truss has yet to go into detail on how she will help level up the UK by fixing the social disparities on matters such as quality of education, access to health care as well the quality of living between the North & South of England.  

Time is ticking…  

Liz Truss has not made levelling up her flagship policy for her administration, but rather tax cuts & deregulation. Whilst she has given an inkling as to what her approach would look like – such as introducing new investment zones & supporting the Northern Research Group pledge card – she has yet to give a detailed plan on what their levelling up agenda would look like or how long their proposals would take to implement.  

The immense cost to level up makes it near impossible to do anything substantial in a short time frame and with many Southern MPs concerned of losing their seats on the topic of development, illustrated with the impact of the 2021 Chesham & Amersham by-election which ultimately caused planning reforms to be ditched during Johnson’s premiership. Centre for Cities believes that to truly level up and close the North-South divide would cost £2 trillion and would take decades to implement long-term efficient policy. In truth, Liz Truss will have very little time to fulfil any substantial changes to the geographical disparities in the UK in under two years. The incoming winter crisis & the rising tensions with Russia will inevitability shift the focus away from levelling up just as Covid-19 had done for Johnson’s government.  

Labour’s Alternative 

Shadow Minster for Levelling Up, Lisa Nandy, introduced an alternative with a 5-point plan to level up the UK. Focusing on jobs, Labour wants to spread job opportunities across the UK by investing £28bn each year in green projects in industrial and coastal towns. The plan also wants to set off 100k new businesses to help local high streets, and includes fostering greater connectivity with towns and villages by investing in better transport and digital infrastructure, more devolution, and reintroducing neighbourhood policing to ensure town centres are safe. 

As Labour Conference rumbled on and Labour revealed more of its outlook in the run up to the next election, Labour’s Shadow’s Transport Secretary Louise Haigh offered a telling insight into Labour might tackle the problem of connectivity. Haigh promised not just to nationalise the railway system once more, but to build a Elizabeth Line for the North and deliver the Northern Powerhouse Rail and HS2 in full. Lisa Nandy also spoke at Labour Conference at an event with the Conservative-led thinktank Onward pledging to boost building of social housing and “finish the job” on rebuilding northern cities that was originally planned during the last Labour government.  

GK Strategy are experts in helping organisations to understand the changing political landscape, and strongly recommend that business leaders quickly meet with government to discuss their priorities. For more information, get in touch with scott@gkstrategy.com. 

GK Point of View: The Circular Economy and its investment potential

With an increasing number of deals being conducted in this space, GK consultant Milo Boyd takes a look at the potential of the circular economy for investors.

The circular economy – a system of trade which aims to increase the efficiency of resource use and reduce environmental impact, while developing the wellbeing of individuals – is increasingly being looked upon as an area that warrants attention from investors, and it seems that the concept is here to stay. A 2021 report published by BDO showed that the concept has been attracting a growing amount of investments – more than £1.5bn of capital has been directed into the circular economy since 2018. Of this funding, 33% of the deals have been conducted in manufacturing and industrial sectors and a further 33% has been directed to the food and drink sector, giving an indication of the breadth of opportunities available for investors. The upward trend in investment would indicate that these opportunities are only going to become more numerous as the UK continues to march towards a more sustainable future, and increasing numbers of organisations place ESG at the front and centre of their business operations.

Fundamental to this shift is the growing understanding of the economic returns that the concept of a circular economy can achieve across a variety of industries, notwithstanding the more obvious environmental benefits. For example, 2021 research from the Ellen MacArthur Foundation and Material Economics found that an adoption of circular economy principles into a system that addresses material use, shifting the focus to retaining and reusing resources and reforming our food system, can help to tackle 45% of Co2 equivalent emissions around the world, and found that profitability of investments can be significantly increased compared with non-circular investments.

Finance has rightly begun to seize on these findings, and this is reflected in the overall trajectory of investment into the concept, as investors strike away from the ‘take-make-dispose’ and instead increasingly seek ‘circularity’ in investment decisions. The optimisation of the UK’s resources can be both economically stimulating and encourage the scale up of markets that support the UK’s net zero ambitions, whilst simultaneously producing high – and crucially less risky – returns for investors.

It is important that the Government provides the right environment to encourage these investments to continue. The installation of a new government brings the prospect of a political and regulatory reset, and with it a new direction of travel for policy. A particular point of focus is what approach new the Prime Minister will take. Liz Truss, a self-confessed fiscal Conservative who is keen to hit the ground running, has vowed to bring about the biggest change to the UK’s economic policy for decades. It remains to be seen how Liz Truss will approach environmental policy, aside from conflicting statements to boost the green economy whilst simultaneously supporting fracking.

The circular economy is an important feature of the Government’s environmental strategy, as has been made clear in the 25 Year Environment Plan published in 2018, and the more recently published Net Zero Strategy. But there has been scant indication of how the new Prime Minister intends to build on these strategies and how she hopes to maximise resource productivity, reduce waste of resources, and to encourage an acceleration in the circular economy’s development. This is where the financial sector needs to proactively respond and not shirk its responsibility – finance can and should be a key lever in maximising the circular economy’s potential. It should be in the sector’s immediate priorities to establish a working relationship with the Government to achieve the environmental and financial benefits that can set the UK on a path towards economic growth and environmental sustainability. This will be of vital importance if the Government and the UK’s finance sector are committed to maintaining the UK’s status as a global leader for finance and climate action.

GK Strategy are experts in helping organisations understand the changing political landscape, and strongly recommend that business leaders quickly meet with government to discuss their priorities. GK is well placed to support finance leaders looking to connect with relevant stakeholders, get in touch with milo@gkstrategy.com for more information.

GK Insight_ Domestic Maritime Decarbonisation Consultation analysis

GK Insight: Domestic Maritime Decarbonisation Consultation analysis

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GK takes a look at some of the key points from the Domestic Maritime Decarbonisation Consultation, published in July 2022. 

Although transport is the largest contributor to the UK’s domestic greenhouse gas emissions (GHG), the maritime sector only makes up for 5%. Despite emitting a relatively small 5.3million tonnes of carbon dioxide equivalent, domestic maritime vessels contribute more emissions than domestic rail and bus emissions combined, which account for significantly more journeys up and down the UK.

The Department for Transport (DfT) has shown initiative and previously moved to encompass smaller sectors within the Net Zero Strategy. The DfT has now demonstrated a desire to go further by highlighting the need to move towards a cleaner future and the necessity of tackling emissions from the domestic maritime sector, and has published a new consultation aiming to establish the optimal pathway to net zero emissions for the sector.

Traditionally described as a ‘hard to abate sector,’ the journey to reach a net zero future will require significant buy in from the industry to ensure that new technological developments can be quickly brought into operation and achieve an effective reduction in emissions. Difficulties arose following the 2019 Clean Maritime Plan, which established a high-level route map to clean growth, and highlighted the scale of challenges faced by the maritime sector. Such challenges include maritime fuel prices which has resulted in a lack of incentive for shipping companies and associated industries to invest in reducing emissions, among others. To combat these challenges, building cross-industry and cross-departmental collaboration into the ‘Course to Zero’ strategy – which will be published following the Domestic Maritime Decarbonisation consultation concludes – will be essential to ensure the process of developing new maritime infrastructure is aligned with ongoing Government initiatives, such as levelling up. Rather than hindering action towards net zero, aligning maritime decarbonisation with challenges like levelling up offers considerable opportunities when delivered in unison, providing much needed investment to coastal communities that have too often been overlooked for central government funding.

The recently published consultation for domestic maritime decarbonisation, released ahead of a later ‘Course to Zero’ strategy to plot the route to net zero emissions for the industry, indicates the level of the Government’s commitment to creating a regulatory environment in which promising technologies can be implemented in order to assist the journey to a net-zero future, such as using hydrogen-derived fuels, including ammonia, and battery electrification. Moreover, the consultation will seek to identify different strategies in order to reach net zero emissions by 2050, as well as understanding the remaining barriers to this sector.

To kickstart this process, the Government has committed £416 million to support the research and development of transport decarbonisation, and £206 million has been specifically allocated to establish a new team within the DfT- the UK Shipping Office for Reducing Emissions – whose aim is to support the decarbonisation of the maritime sector. This move highlights the progressive mindset permeating through government – at least until Liz Truss or Rishi Sunak become Prime Minister – and demonstrates the government’s understanding of the severity of the crisis given that it deems it sufficiently important to strongly intervene. Further government intervention can be seen through economic measures such as supporting the raising green finance, as well as working with industry leaders to promote investment from beyond the maritime sector.

GK Strategy are experts at helping organisations navigate government policy and position themselves as leaders within their sector. If you would like to learn more about the future net zero policy landscape, please do get in touch.