Inside the Chancellor's bold Budget: a boost for the UK’s renewable future?

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5 November 2024

Last week, the Chancellor delivered a bold and ambitious Budget, one intended to chart a course through economic uncertainty and lead the UK towards growth, investment, and long-term stability. Her message is clear: “Invest, invest, invest” - a mantra she believes is essential to spark economic growth, boost productivity, and enhance the nation’s competitiveness.

This Budget is ambitious in both scale and vision. It introduces £70 billion in public spending, raises over £40 billion through taxation - largely from business taxes - and proposes borrowing an additional £32 billion each year for investment. Amidst these substantial figures, the Chancellor has specifically focused on several key issues including infrastructure, growing the UK’s renewable energy output, and public services. Unsurprisingly with significant spend increases, tax rises are part of the plan, with £25 billion being raised via higher National Insurance Contributions (NICs) from employers.

So, will this bold Budget truly drive growth and attract critical investment, especially in sectors like renewables, which are pivotal to the UK's green transition? Renewable energy is a capital-intensive sector that requires a supportive business environment and policy framework, to thrive.

In 2025-26, the Department for Energy Security and Net Zero (DESNZ) has been allocated a £14.1 billion budget. Key spending announcements include:

• GB Energy: £125 million allocated, with £100 million earmarked for clean energy project capital funding.


• Green Hydrogen: £2 billion invested across 11 projects totalling 125MW capacity, including Cromarty and Whitelee, under the first Hydrogen Allocation Round.


• Ports: £134 million to support infrastructure for floating offshore wind projects.


• National Wealth Fund: Targeting £70 billion in private investment, backed by a new Industrial Strategy for growth sectors.


• Infrastructure Strategy: A 10-year strategy to be published with Phase 2 of the Spending Review.


• Policy Updates: National Policy Statements to be updated within 12 months, providing industry clarity on infrastructure priorities.


• Grid Improvements: Fast-tracking grid connections and building new network infrastructure by enhancing the grid connection process.

Growth and investment: cornerstones of competitiveness

Economic growth is at the core of the Government’s agenda, and it’s encouraging to see recognition of the vital role renewables play in that mission. Our sector is an economic powerhouse, delivering high-quality jobs, spurring regeneration in coastal communities, and bringing down energy costs for businesses and households alike. This strengthens the UK’s competitiveness, productivity, and economic resilience.

We welcome the Chancellor’s pledge to foster a climate of confidence that drives private investment - a key element for renewables, which need significant upfront capital. Reaching Clean Power by 2030 alone will require investment programme averaging £40 billion or more annually, as highlighted by NESO. The National Wealth Fund’s commitment to transforming UK ports into hubs for offshore wind manufacturing and assembly marks a major step forward. This investment not only supports domestic projects but also positions the UK as an exporter of cutting-edge technology. With the right incentives and policy alignment, the UK can attract hundreds of millions in offshore wind investment, building robust supply chains and creating thousands of jobs. In the global green race, timing is critical, and we urge the Government to act swiftly.

Support for new green hydrogen projects is equally promising. These initiatives will enhance the flexibility of our energy system, delivering stable, storable green energy that can be deployed on demand.

Action needed - and fast

The Offshore Wind Industrial Growth Plan highlights the economic potential waiting to be unlocked by renewables. By aligning renewable expansion with an effective industrial strategy, we could triple the UK’s offshore wind manufacturing base, boosting the economy by £25 billion by 2035 - yielding £9 for every £1 invested. The UK is also well-positioned to lead in supply chains and has expertise in emerging technologies like green hydrogen, tidal stream, and floating offshore wind. Realising these opportunities could see our renewable sector generate tens of thousands of jobs: offshore wind alone currently supports 30,000 roles, with the potential to add another 70,000 by 2030, while onshore wind could support more than 27,000 jobs in the same timeframe.

The coming years will be pivotal in seizing the economic and environmental benefits of renewables and achieving our decarbonisation goals.

To accomplish this, the UK needs an attractive business environment that mobilises private investment, along with a modernised Contracts for Difference (CfD) scheme, and streamlined frameworks to accelerate net-zero infrastructure deployment. A scale-up in supply chains and skills development is essential to meet our ambitious targets. Achieving a secure energy system will also require forward-thinking investment and planning.

Our energy mix needs to be diverse, incorporating fixed and floating offshore wind, onshore wind, solar, tidal stream, green hydrogen, and energy storage, supported by expanded grid infrastructure and flexible services. The UK must adopt a more ambitious approach to approving new wind farms each year, sending a clear signal to investors and manufacturers in the supply chain. This will help secure affordable energy for consumers while bolstering our energy security.

Economic forecasts: balancing challenges and opportunities

According to the Office for Budget Responsibility (OBR), the Chancellor’s spending plans could give a temporary boost to GDP, with growth peaking at 2.0% in 2025, but tapering off to around 1.5% by decade's end. However, the increased employer NICs could dampen private sector investment and tighten disposable income, potentially complicating the Government’s growth targets.

With rising public spending and labour costs, inflationary pressures will likely affect both businesses and households. The OBR projects inflation to peak at 2.7% in mid-2025, then gradually ease to the Bank of England’s target of 2.0% by 2029. The renewables sector has already experienced cost hikes due to global supply chain disruptions and escalating materials and labour expenses - a trend likely to persist, further pressuring project financing. With interest rates remaining relatively high, renewables (which are heavily reliant on upfront capital) will likely feel the pinch from higher borrowing costs. The OBR anticipates these rates will stabilise around 3.75% by next year’s end.

The budget may increase cost of living and energy bills pressures. For households, tax increases may temporarily constrain disposable income, with real incomes expected to return to pre-pandemic levels by 2026 or 2027. Modest improvements in living standards are forecast thereafter, but real household incomes may still fall short of prior OBR predictions by 2029. The renewables sector faces unique challenges here, with high inflation and interest rates increasing the cost of capital. Unlike other sectors, renewables need large, upfront investments, making them more vulnerable to financing fluctuations.

Despite the challenges, this Budget introduces significant economic measures that could shape policy in impactful ways. To secure sustainable, long-term growth, however, additional actions will be essential for strategic sectors like renewable energy, which play a key role in the UK’s clean energy future.

The Chancellor’s commitment to sustained investment could have a profound, lasting impact on critical sectors like ours, building a strong foundation for future economic growth. While obstacles remain, this Budget could indeed mark a pivotal moment for the UK’s economy and its path toward a cleaner, greener energy future.