A “new deal” needn’t be green
Britain is seeking measures to revive its Covid-ravaged economy. It should choose from a broader palette than just “green”, says Matthew Lynn.


President Macron of France (pictured) is betting big on a €100bn reboot of the economy that will focus on green technologies. The EU’s new €750bn coronavirus rescue fund will also focus on environmental projects. In Germany, Chancellor Angela Merkel has pledged €40bn for a green recovery fund. Joe Biden, if elected as president of the US, has said he will spend big on a “green new deal”. Massive green stimulus packages are all the rage, and there will be those arguing that Britain should do something similar. That would be a mistake.
The perils of overinvestment
Not that there’s anything wrong with green technologies. Climate change might or might not turn out to be quite the global emergency it is cracked up to be. But most green energies deliver cheaper power, cleaner air and less pollution, and it is hard to see anything not to like about that. Sustainable manufacturing and farming will be more durable, more local and, again, usually cheaper as well. It will be far better if we are all driving electric cars, living in solar heated homes, eating lab-grown meat, with vegetables from a vertical farm on the side, while getting deliveries from a battery-powered drone. If anyone can work out how to make an electric-powered plane, preferably drawing its power from the sun, then so much the better.
But one thing is surely clear. We are about to see massive over-investment in the sector. Every country around the world is using the Covid-19 recession as a reason for sinking vast sums of government money into one green project after another. Factories are going to be built to build batteries by the tens of millions. Wind and solar farms, barrages to capture tidal power and geothermal plants, are going to be built across Europe to create vast quantities of renewable energy. Research and development labs will be set up across the continent to create the technologies that will make fossil fuels about as relevant to the 21st century as horses were to the 20th. If it is green, and renewable, and reduces carbon emissions in one way or another, it is going to receive vast quantities of investment over the next five years.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The result? It will be the same as in every other industry when there is a massive wave of investment. There will be too much capacity. It happens all the time in the commodities market. It happened in the telecoms bubble of the 1990s. It has happened in steel, in cars, in shipping, and in countless other industries. Too much stuff is made, and prices inevitably crash. Fast forward five years, and they will be giving away solar panels to put on your roof for practically nothing. Electric car batteries, one of the main reasons why petrol-free vehicles remain relatively expensive compared with their traditional rivals, will be as cheap as chips. For the relatively minor cost of some undersea cables, the UK will be able to buy Macron’s and Merkel’s green electricity for practically nothing. The billions of green investment will be generating vast quantities of the stuff, and since you can’t store it, you might as well sell it off to the British for whatever they are willing to pay (which since we will probably be the only buyer won’t be much).
Focus on what we’re good at
The right strategy for the UK is to forget about making any green investments of our own and launch our own economic stimulus before the end of the year, focusing instead on all the industries the rest of the world is ignoring right now. Such as? Consumer goods, where there is plenty of scope for technology-led innovation, the creative industries, fintech, and the law and education, where there could be a huge space for artificial intelligence to revolutionise the way services are delivered. We are pretty good at all of those, and can strengthen our lead while everyone else is ignoring them. In a few years’ time, we will be able to buy all the green energy and technology we need at a fraction of their cost – and we won’t have to lose tens of billions in the process.
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years.
He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.
-
Government launches full review of parental leave and pay – what could it mean for you?
The government wants parental leave to be fairer - will its shake-up fix the widespread problem for families?
-
Nationwide: House prices see biggest monthly fall in over two years
UK house prices dropped by 0.8% in June, according to Nationwide. We reveal the top-performing and worst-performing regions
-
How Labour could crack the UK's growth conundrum
Opinion Planning and state procurement are key to productivity, says David C. Stevenson
-
Trump eyes private foundations to raise tax. Will philanthropy decline?
The picture is mixed, but philanthropy on the whole is alive and well, says Simon Wilson
-
Trouble brews in B&M as bargain shops take a hit
Opinion Once a stock market darling, B&M's share price has slumped. What has gone wrong for bargain shops?
-
'Angela Rayner taking charge of government policy is a frightening prospect for UK economy'
Opinion Deputy prime minister Angela Rayner is making moves to change the direction of our government. That should terrify us all, says Matthew Lynn
-
'Nationalisation is not the answer'
Opinion Labour's enthusiasm for nationalising steel was met with approval across the spectrum. Political consensus is a sign that thinking has been abandoned, says Max King
-
Why did the government take over British Steel – and was it a good idea?
The government has stepped in to take control, not ownership, of British Steel, citing national security and other factors. But does that make sense?
-
'Rachel Reeves' plan to force pension funds into UK assets won't work'
Opinion Hustling pension fund cash into British assets sounds like a good idea. It would be better to make Britain an attractive place to invest, says Matthew Lynn
-
What caused the Birmingham bin strike – and what does it mean for British businesses?
The Birmingham bin strike is the fallout from an equal-pay claim brought by female cleaners. That bodes ill for the rest of British business