THE rush to Net Zero risks wiping ten per cent off economic growth by the end the decade and triggering a financial crash, the Government has privately admitted.
The UK’s national debt would rocket as its anaemic economy is shunned by investors — and the poorest in society will carry the burden, it is claimed.
GettyThe Net Zero dash risks crashing the economy, a leaked government document warns[/caption]
The never-before-published Whitehall assessment of the effects of Net Zero on the British economy has been leaked to The Sun.
It contains warnings that poor planning for going carbon neutral by 2050 comes with the “potential risk of destabilising the financial system”.
Hundreds of billions of pounds worth of assets around the world being retired up to 30 years before the end of their shelf life could cause market meltdown due to sudden drops in the value of firms, including those from Britain and overseas companies who invest here.
The report warned the financial risk of these “stranded assets” — such as power plants, chemical factories and even aircraft — is “not yet fully reflected in companies’ values”.
As a result, it claims, an “abrupt transition could act as a sudden shock, resulting in a sudden drop in value and presenting a risk to investors and shareholders”.
The document cites warnings from analysts at McKinsey who say up to “$2.1trillion worth of assets” globally — around £1.6trillion — may have to be set aside, with a major knock-on effect on Britain.
It adds that coal-fired power plants would have to retire ten to 30 years earlier than they have done in the past to meet the Paris Agreement, despite billions invested in them.
Britain has already retired its coal energy plants in favour of wind and solar, but the hit to countries yet to do so could still affect UK markets.
The report also warns “disruption caused by the transition could result in unemployment and skills mismatches, with negative knock-on impacts for growth, productivity, and the ability to reach Net Zero.”
It also raises the alarm that the UK is poorly placed for the transition due to sluggish global inward investment.
But perhaps the most stark warning comes to the potential hit to GDP by the rush to go green as household and business consumption — or spending — is hit by higher costs and uncertainty.
The leaked document states: “Estimates suggest that by 2030, ten per cent of GDP (one per cent annually over ten years on average) will have been subtracted from consumption.”
The Business and Trade Department analysis, prepared in November 2023, admits: “The level of investment required and need for redistribution means government debt is likely to increase as a result of the transition to Net Zero.”
A government spokesman said: “Net zero is the economic opportunity of the twenty-first century, and will deliver good jobs, economic growth and energy security as part of our Plan for Change.”
Last night, Shadow Business Secretary Andrew Griffith said: “This official government advice admits these policies will hit the poorest hardest, could cause a massive shock to the economy, destroy growth and cause trillions of pounds of perfectly good business assets to be written off.
“Labour now needs to come clean.
“Does it regard taking a wrecking ball to the UK economy a price worth paying?”
Squeeze harder on Sun readers
By Harry Cole
THE assessment of the damage Net Zero could do to the economy admits that Sun readers will be hit the hardest.
Pressure on lower income households to change their lifestyle, heating and cars will be beyond many of them, civil servants admit.
It says spending will be squeezed, especially after a decade of weak wage growth, the cost-of-living crisis, high inflation and high interest rates.
The Macroeconomic Impacts of the Net Zero Transition report says it is questionable whether less well-off households will be willing or able “to forgo consumption to fund higher investment”.
Written by the Business Department’s Economy & Strategic Analysis Team, it adds that public spending will be needed to offset such problems.
And it goes on: “The overall impact of the transition to Net Zero on public finances is likely to be negative.
“Public spending will be required to offset negative impacts on disadvantaged groups.”
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