Isra-Mart srl:Survey: UK spending cuts have knocked clean tech confidence

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The government was today urged to overhaul its clean tech policies, after a new survey of business leaders found investor confidence in low-carbon projects has fallen since the coalition announced deep spending cuts in October's Comprehensive Spending Review (CSR).

Published today, the study by Ernst & Young surveyed more than 300 government and business and investment leaders and found the vast majority think the UK's clean tech policies are too unstable.

It concludes that the UK needs to "aggressively" step up investment in the clean tech sector as a means to drive future economic growth.

Energy and climate change secretary Chris Huhne insisted low-carbon projects had been largely protected from spending cuts, noting that his department was one of only a handful of departments to secure an increase in funding.

However, the survey revealed that confidence among clean tech investors still fell in the wake of the spending review. Only 39 per cent of respondents said clean tech could significantly contribute to economic growth and employment following the announcement of spending cuts, compared to 65 per cent beforehand.

Ernst & Young reiterated its call for the government to increase the £1bn of funding earmarked for the planned Green Investment Bank (GIB), suggesting that channelling carbon tax revenue into it could ensure an ongoing flow of capital.

"The CSR offered up a variety of mixed messages for the clean energy and technology industry," said Steve Lang, Ernst & Young's UK clean tech leader. "The Department of Energy and Climate Change's budget was only cut by five per cent annually over the next four years, and there was a commitment to establish the GIB, and fund a £1bn CCS project. However, the levels of support are not currently sufficient to establish the UK as a world leader in low-carbon technologies and there remains uncertainty in key areas of policy, such as feed-in-tariffs that is constraining investment."

The survey comes as reports emerged today that the the government may phase the introduction of the GIB, initially setting it up as a fund without the power to raise finance through the issuing of bonds.

Reports in the Guardian suggested that Huhne is losing the argument with chancellor George Osborne over the bank's fund-raising abilities, with Treasury officials warning that allowing it to issue bonds could contribute to the UK's deficit as the resulting debt would have to be held on the government's books.

Huhne is also preparing to publish plans tomorrow for a major overhaul of the electricity market that the coalition claims will serve to provide much-needed policy certainty and drive investment in low-carbon infrastructure.