Blog: Why the Spending Review could mark a pivotal UK moment for climate and growth

20 June 2025 - The government could have sidelined climate policies in the Spending Review - instead it earmarked billions of pounds for the green economy, writes UK Corporate Leaders Group Director Beverley Cornaby. First published in BusinessGreen.

Against a back drop of increased political polarisation, the UK government could have sidelined climate policies in last week's Spending Review. Instead, it has earmarked billions of pounds for the transition to a green economy.  

Through the Spending Review, alongside increased spending on the NHS, schools and defence, the UK government has committed more than £60bn towards the green economy. While they have a lot of competing priorities, funding for the energy security and climate action infrastructure projects which can enable new green growth has rightly increased.

One key area of spending on the green economy was improving the energy efficiency of homes, with £13.2bn allocated to the Warm Homes Programme. This follows a prolonged history of UK governments flipflopping on home energy efficiency programmes, creating uncertainty in the markets and losing householders' confidence in adopting newer technologies, such as heat pumps. However the need to support people in reducing bills and improving homes through a consistent, well-funded programme is critical.

Further areas of spending include investment in low carbon energy infrastructure, most notably in new nuclear, and in transport, with a four-fold increase in low carbon local transport infrastructure spending for areas outside of London.

All of this is being delivered under the banner of growth and clean energy.

While some in the green space may not agree with all the areas of spending, this is significant. It sends a clear message: the UK is serious in putting its climate targets into action and this can be balanced alongside health, social, and security priorities.

The Spending Review as Labour closes in on its first birthday in office. Those past 12 months have seen the political consensus on net zero in the UK crumble, and at times it has appeared as if Labour were faltering too. However, this spending review sends a clear political signal that climate action is core to the UK's growth plan.

This approach is not replicated globally. Since President Trump earlier this year announced the US would be pulling out of the Paris Agreement - the most important global treaty for tackling climate change - he has continued to roll back climate and nature policies. That includes blocking state level laws that could reduce fossil fuel use,  dismissing hundreds of scientists working on the US's National Climate Assessment, and ending an extreme weather database that supported businesses, especially farmers and insurers, to understand and predict disaster risk.

In the UK, despite widespread public backing for climate action, the Conservatives are increasingly trying to push back on the net zero agenda - albeit while also not entirely recanting the Party's green efforts in government nor abandoning their commitment to climate action altogether.

Meanwhile, in a seeming attempt to mirror the what is happening in the US, Nigel Farage's Reform party - which won garnered sizeable support in the recent UK local elections - is now trying to see through its commitment to scrap the UK's net zero target in the local authorities they now control. Some of this appears to be about renaming departments and services from 'climate' to 'environment'. But, more worryingly for both local and national growth - as well as potentially destabilising communities - they are now trying to stall renewables projects.

From a business perspective, the key insight to focus on is the need for investment-led growth by spending on infrastructure - something the Labour government appears to have taken on board in the Spending Review. The UK has been crying out for more investment to replace and renew old, outdated, and in some cases crumbling infrastructure. The challenge for the government now is how quickly the projects they have committed to will be taken forward against a backdrop of local challenge. It will need to act quickly, ensuring policy frameworks are consistent and supportive, to unlock private sector investment, which will be critical to implementation.

At a time when the net zero narrative is being publicly questioned, the government is delivering under a banner of growth. In doing so it has signalled what most businesses already know: that investment in climate action is good for people, good for business and good for the economy.

First published in BusinessGreen.

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