Rishi Sunak watering down the UK’s climate commitments has damaged Britain’s position on the world stage for business investment, according to the former Bank of England governor Mark Carney.
In highly critical comments, Carney indicated that global companies would now think twice about locating their activities in the UK after Sunak pushed back key net zero deadlines and sanctioned new oil and gas drilling.
Speaking to Nick Macpherson, a former permanent secretary to the Treasury, at an online event, Carney said major businesses he had spoken to prioritised countries with clear environmental commitments before making investment decisions.
“In my conversations with companies around the world, their first conversation about location is: ‘Am I getting clean power?’ It doesn’t make sense to relocate without green power. You start throwing that into doubt, [and] it becomes a lot more complicated discussion.”
Citing several countries that have highlighted the availability of clean power to international businesses, the former Bank governor added: “The UK was in that camp, now it’s blurred around it.”
Sunak last month announced a U-turn on the government’s climate commitments, including a decision to push back a 2030 deadline for the sale of new petrol and diesel cars to 2035. The prime minister also kickstarted a new round of North Sea drilling, pledging to “max out” the UK’s oil and gas reserves.
Carney, who as the Bank’s governor pushed to accelerate the decarbonisation of the global economy, called the decision “disappointing and mistaken”, adding: “If you make a credible forward commitment – particularly with the market and businesses looking forward – they do most of the work for you. And then it’s less of an issue.
“There was very little weight, in my view, given to that decision. At least in any of the communication of that. And that’s a challenge,” he said..
Pushing ahead with new oil and gas drilling risked creating a “stranded asset problem” in the UK energy sector, he warned, referring to the risk that the value of fossil fuel assets could fall rapidly.
Highlighting forecasts from the International Energy Agency that global oil demand will peak this decade, Carney said: “You go back three, four years, and it was the 2030s. That’s how much things have moved. That means we are going to have the stranded asset problem in the energy sector, and it’s going to crystallise sooner than people think.”
During the online event, hosted by King’s College London and the Fairness Foundation, Carney was challenged by Macpherson, who suggested Sunak’s move brought the UK into line with the EU policy on the phasing out of internal combustion engine cars.
However, Carney suggested the impact on business investment would come from the government chopping and changing its position. “It has, exactly [moved in line with the EU]. But it’s moved – is the first thing. And the second, it’s a bit like – I didn’t get the chance to move the inflation target around.”
Carney had faced heavy criticism during his time at Threadneedle Street from rightwing Conservative MPs for failing to hit the 2% target for inflation set by parliament, as well as for “mission creep” in expanding its remit to focus on decarbonisation.
Arguing that it was a central priority for the Bank to spot financial risks from the transition away from fossil fuels, he told the event: “If the UK is really serious [about net zero], do you know which of your businesses are going to prosper and going to suffer under that scenario? That’s the question … you have to ask that question.”
