‘Dragons' Den-style’ investment fund needed to achieve net zero, think tank says

25th August 2023

The UK needs a new public investment fund that provides green companies with finance in exchange for part ownership and a share of future profits, a think tank has suggested.

In a new report, the Institute for Public Policy Research (IPPR) argues that a ‘Dragons' Den-style’ fund is needed to boost investment in green technologies and achieve a net-zero economy.

The fund would provide finance for projects in green manufacturing, and would encourage private companies to make strategic investments that they would not otherwise make.

Initial funding for the investment fund itself would come from the Treasury, but it would be further supported by tax revenue generated by North Sea gas and oil.

Levies could also be imposed on share dividends from fossil fuel companies to support the investment fund, effectively diverting profits away from these firms and directing them towards a greener future economy.

Simone Gasperin, IPPR associate fellow, said that the new fund is “a policy proposal for our time”, and that the UK needs to “finance and coordinate strategic industrial policy projects” that deliver net zero, economic prosperity and inclusion.

He continued: “The cost of inaction on people’s livelihoods will be too high, while there are huge opportunities to be captured by the government co-investing with private companies.”

With this year marking the first anniversary of the US Inflation Reduction Act, and the EU responding with its own Green Deal Industrial Plan, the report warns that the UK risks “remaining on the starting blocks of the race to capture the green industries of tomorrow”.

It argues that a new, green industrial strategy is needed, with the government setting a clear direction for investment that will deliver prosperity, levelling up, reduced emissions and restoration of nature.

The IPPR calls on a new National Investment Fund investment fund to:

• Invest via equity finance in companies willing to expand green manufacturing activities and to decarbonise heavy industrial processes

• Support firms that are important to the UK’s future economy, and to grow the economy in more deprived regions, rather than aim for an immediate return on its investment

• Operate alongside existing funding schemes like the British Business Bank, the UK Infrastructure Bank and research grants from UKRI to “crowd in” additional private financing

• Encourage the companies in which it owns a stake to reinvest profits in growing the economy and in their own staff rather than paying out excessive dividends

• Operate under formal transparency and accountability rules, reporting annually to ministers and parliament on its value for money in terms of regional rebalancing, decarbonisation, job creation, boosting domestic supply chains, technology development and others.

George Dibb, head of the IPPR’s Centre for Economic Justice, said: “The US and EU are making major investments to secure the manufacturing and technologies of tomorrow, and it’s time the UK stepped up.

“Our proposal for a National Investment Fund is a practical way for the UK government to crowd-in private sector investment by strategically supporting companies and taking a share in their future success.”

Image credit: Shutterstock


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