CBI urges UK to use tax incentives to drive green change

The Confederation of British Industry (CBI) has called on the government to use tax incentives to help drive investment in high-growth green sectors, allowing the UK to “outsmart rather than outspend international competition”.

The CBI says the green economy offers unrivalled opportunities to meet the UK’s commitment to decarbonise by 2050, allowing it to capture green growth that could deliver a £57 billion a year GDP boost by 2030.

However, it said that current inaction means the UK risks falling behind other nations.

Both the US and Europe have already introduced what the CBI describes as impressive reform packages (US Inflation Reduction Act and the EU Net Zero Industry Act) to incentivise green investment, using tax credits, subsidies, grants and loans.

The CBI is proposing several recommendations, including a new Green Innovation Credit for green technologies and processes with a headline rate of 40% to unlock private sector R&D and innovation.


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It is also suggesting a reduction in corporation tax from 25% to 10% on profits derived from green technologies and a capital allowance rate of at least 120% to support capital investment in electric vehicles and battery manufacture, grid improvements, low carbon power, heat pumps and retrofitting, biofuel refining and refuelling, infrastructure for deployment of hydrogen, and CCUS adoption by heavy industry.

Rain Newton-Smith, CBI chief executive, said: “The UK is lagging behind in the global green growth race. Our US and European rivals have bolted out the gate with incentivising reform packages, securing major market share and creating skilled jobs.”

He said the UK had initially led the pack by setting international standards and being the first major economy to sign net zero into law.

“We must now move at pace to reclaim our lead in this field, to achieve our net zero goals and build in long-term, sustainable economic growth. Public funding alone will not be sufficient.”

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