The UK needs its own Inflation Reduction Act

The Institute of Directors is calling on the UK government to be significantly more active in incentivising green industries and technologies.

In a recent survey of IoD members, nearly 8 in 10 businesses supported subsidies, either to achieve a step-change in how we tackle climate change or to level the playing field with the EU and the US.

Dr Roger Barker, Director of Policy at the Institute of Directors, said:

“The Inflation Reduction Act in the US is a game changer which cannot be ignored by UK policy makers. It provides substantial incentives for companies to pursue green innovations and green technologies in the United States rather than in the United Kingdom. The EU is also raising the stakes through its ‘Green Deal Industrial Plan’ which, amongst other things, is proposing a significant relaxation of the EU’s state aid rules when it comes to investment in green technology.

“In 2021, Prime Minister Boris Johnson announced that the UK’s strategy was to ‘lead the world in ending our contribution to climate change’. However, we have now reached a situation in which that rhetoric needs to be converted into substance.

“A particular concern is that short-term budgetary concerns will override the strategic imperative of establishing market leadership positions in green business. It’s imperative that government and the private sector work together, otherwise the UK will find itself left behind in the accelerating race to lead the green economy.

“The UK deserves nothing less than its own version of the Inflation Reduction Act – to ensure that the UK becomes the global location of choice for all forms of green investment.”

Full survey results

859 responses collected between 10-26 February 2023

In the United States, the Inflation Reduction Act gives substantial financial subsidies to invest in green technologies that are based in the US. The EU has indicated it could relax its own state aid rules for green industries in response. To what extent do you agree that the UK government should also subsidise green industries and innovations that take place within the UK? Choose the one option that best represents your view.