The new British Prime Minister Keir Starmer approved £7.3 billion in green investments.
The United Kingdom approved the creation of a new sovereign fund to revitalize the country’s ailing economy and attract billions of pounds in investments. The UK’s new government under Prime Minister Keir Starmer freed funds for immediate use.
The new National Wealth Fund will allocate £7.3 billion of public money to attract private investments in key strategic industries like hydrogen, automotive, and steel. It will also finance the construction of large industrial centers like ports and gigafactories across the country.
Starmer and his finance minister Rachel Reeves plan to attract three times as much investment in the country. Business activity and investments in the UK slowed down significantly since the 2016 Brexit vote. Although the new Labour government is unlikely to bring the UK back into the EU, it may attempt a rapprochement strategy to enhance British trade and economy.
The National Wealth Fund was embedded into already existing national sovereign funds to speed up the process of money allocation. The fund will be placed on top of the already existing financing by the UK Infrastructure Bank. This entity was opened in 2021 with £12 billion in liquidity and the ability to issue £10 billion in government guarantees.
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Investing in the green transition
Prime Minister Keir Starmer placed the UK’s transition to net zero emissions on top of his political agenda ahead of the recent general elections. The National Wealth Fund is supposed to be his key to the transition to a green economy.
All the investments supported by the National Wealth Fund will go toward decarbonization efforts. The UK’s net zero carbon strategy commits to an emission reduction of 41% by 2025, 78% by 2035, and 100% by 2050.
Under the Paris Agreement, the UK must reduce its emissions by 68% by 2030. So far, the country achieved a 50% reduction.
The National Wealth Fund’s objectives were reviewed by a task force formed by top British economists. The task force estimated the UK needs as much as £57 billion in private and public investments to achieve a full green transition.
If all the budget is allocated, the National Wealth Fund could finance as much as £29.2 billion, provided all of its investments go toward decarbonization. That may not be true as the task force hoped some of the funds could fuel private investments in “wider sectors” as well.
Nevertheless, the National Wealth Fund would not be the only tool in support of the green transition. The UK Green Investment Bank was founded in 2012 and continues servicing the British transition to net zero.
