Vulcan View: The latest EU developments 27 May – 31 May

What a Labour Government means for the UK Economy

With the UK General Election cycle having completed its first week, the pressure has been on the Labour Party, who hold a significant polling lead over the Tories, to provide details on what exactly a Labour government means for the United Kingdom? In particular, what can voters expect from Sir Kier Starmer’s party on the economy.

In her first speech on the campaign trail, Shadow Chancellor Rachel Reeves MP provided some insights into her vision for Labour in government. In her words, a Labour government would be concurrently “pro-worker and pro-business in the knowledge that each depends upon the success of the other.” She went further to say that Labour was the “natural party of British business.”

In her address to business leaders at the Rolls Royce Factory in Derby, she outlined a number of other key commitments:

• A New Fiscal Lock: Significant and permanent changes to tax and spending will be subjected to a forecast from the independent Office for Budget Responsibility.
• Business Tax Roadmap: To be published within the first six months of a Labour government and to cover the full term of Parliament.
• Corporation Tax: To be capped at the current rate for the life of the next Parliament.
• A Closer Relationship with the EU: Labour would “forge a closer relationship with our nearest neighbours in the European Union to ease the burden of bureaucracy and red tape on British businesses”, which would include a new veterinary agreement and mutual recognition of professional qualifications.

In a rare glimpse of daylight between the potential occupants of Numbers 10 and 11 after July 4^th, Reeves declared herself a Social Democrat and touted her financial services background. Whereas, Party Leader Kier Starmer MP promoted his socialist credentials, albeit admitting that the financial standing of the country would inhibit his ability to deliver upon several of his pledges made during the 2020 Labour leadership race.

To conclude, Reeves sought to clearly contrast the pragmatic solutions of Labour with the alleged economic mismanagement of the current Tory government of Rishi Sunak MP. This follows on from sharp attacks from incumbent Chancellor for the Exchequer, Jeremy Hunt MP, on the damage that Labour’s proposals would do the public purse. The ‘political chancellor’ alleged Labour’s proposals would leave a £38.5 billion blackhole in the state’s finances, and has challenged the party to publicly rule out raising the rate of VAT.

With bread and butter issues dominating the campaign trail in these early days, the pressure is on the Labour party is to present a front of prudence and responsibility to the voters at a time of increasing uncertainty and unrest.

EU, Australia sign strategic partnership on raw materials

On 28 May, the European Union and Australia signed a Memorandum of Understanding (MoU) to establish a partnership focused on sustainable critical and strategic minerals. The MoU was signed by officials including EU Executive Vice-President Valdis Dombrovskis, Commissioner Thierry Breton, Australian Resources Minister Madeleine King, and Trade Minister Don Farrell. Overall, the partnership set out in the MoU will aim to diversify the EU’s supply of essential materials for green and digital transitions whilst also boosting Australia’s domestic critical minerals sector.

Once in force the partnership will span the entire value chain of critical and strategic minerals, covering issues such as exploration, extraction, processing, refining, recycling, and managing extractive waste. The EU and Australia will also collaborate on projects within their territories and in other mutually interested countries. These efforts intend to reduce environmental impacts, benefit local communities, and promote innovative and digital mining technologies.

A significant focus of the MoU is the integration of sustainable raw materials value chains. This involves networking, joint project facilitation, creating new business models, and enhancing trade and investment linkages to ensure the critical supply chains are sustainable and resilient. Additionally, the partnership emphasises research and innovation along the raw materials value chains, with a focus on expanding minerals knowledge and minimising environmental and climate footprints.

Further to this point, the agreement also underscores the importance of high environmental, social, and governance standards and practices. This includes improving policy alignment, ensuring worker safety and conditions, and promoting the sustainable production of critical minerals.

Following the MoU’s signing, a detailed roadmap with concrete actions will be developed over the next six months to implement the Strategic Partnership. This MoU is part of the EU’s broader strategy to secure the raw materials necessary for green and digital transitions, following similar agreements with Canada, Ukraine, Kazakhstan, Namibia, Argentina, Chile, Zambia, the Democratic Republic of Congo, Greenland, Rwanda, Norway, and Uzbekistan. By building these partnerships, the EU aims to create resilient, sustainable, and secure supply chains for critical and strategic minerals.

EU gives final approval to Net-Zero Industry Act

On 27 May, EU Member States finally signed off on the Net-Zero Industry Act (NZIA), paving the way for its entry into force in the coming weeks. The NZIA aims to center the EU as a leader in clean technology manufacturing and green job creation.

Announced as part of the broader EU Green Deal Industrial Plan, the Act will enhance the EU’s competitiveness and stakes in net-zero technologies, hoping to secure a climate-neutral economy by 2050. One of its main goals is to boost the EU’s manufacturing capacity in key net-zero technologies to meet at least 40% of its annual deployment needs by 2030. This encompasses a broad array of technologies critical for decarbonization, including solar panels, wind turbines, batteries, heat pumps, carbon capture, and storage solutions. By setting these ambitious benchmarks, the Act provides long-term solutions in sustainable practices to manufacturers and investors, ensuring predictability and confidence in the market.

The Net-Zero Industry Act addresses several key areas to facilitate this transformation, including improving investment conditions, enhancing skills and workforces across the continent, supporting innovation through regulatory flexibility, facilitating market access, and accelerating CO2 capture. These key areas are critical in achieving Europe’s goals of achieving a climate-neutral economy by 2050.

The first goal of improving investment conditions remains important to streamline administrative procedures, reduce bureaucratic hurdles, and simplify permitting processes for net-zero projects. This will create a preferable environment for investments in clean technology sectors and allow for the innovation of new technologies to emerge that are developed as carbon neutral rather than adapting to the standard.

Secondly, in order to boost manufacturing in clean technologies, Europe must enhance the skills of their workforce through training procedures and education for individuals on what Net-Zero technologies are and how they are essential to the advancement of a clean Europe. These training and educational incentives are known as Net-Zero Industry Academies. Institutions will focus on training professionals in various net-zero technologies, depending on the individual’s skillset and occupation, overall ensuring the EU has the human resources necessary to support this industrial shift.

Innovation to develop new technologies and mindsets around the transition to clean technologies remains essential to promote the continuation of sustainable manufacturing and business practices in the 21^st century. Known as regulatory sandboxes, these innovations allow Member States to test new technologies under flexible regulatory conditions, promoting rapid development and distribution of cutting-edge solutions.

To better equip businesses to transition from their current practices to clean technology procedures, the government must facilitate market access into this next phase of business development. Public authorities will be required to consider sustainability and resilience criteria in procurement processes, thus boosting the demand for net-zero technologies. This measure aims to diversify supply chains and reduce reliance on imports from non-EU countries.

Finally, the government must make accelerating CO2 Capture a priority. The Act sets a target for the EU to achieve an annual injection capacity of 50 million tons of CO2 in strategic storage sites by 2030. This goal is critical for developing carbon capture and storage as a viable climate solution, particularly for sectors that yield significant carbon emissions.

For more information, please contact the Vulcan team here.

Compliments of Vulcan Consulting – a member of the EACCNY.