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Labour's energy price freeze could impact investment in new energy projects

Labour’s plans for an energy price freeze could deter investment in new projects, a report has warned.

Labour’s proposal to freeze energy bills presents a risk to investment in new power plants, while a potential coalition with the Scottish National Party could scupper plans for new nuclear projects north of the border.

The report from Glenigan has laid out the potential impact of a Labour-led or Conservative-led government on the construction industry.

The SNP, which opposes new nuclear projects in Scotland, could be part of a Labour-led government following the general election, potentially affecting Labour’s plans to invest in energy, according to the report.

Glenigan’s policy analysis suggests a combined Labour-SNP government may prioritise investment in infrastructure in the North of England and Scotland, which could see materials suppliers based in these regions benefiting significantly, the report claimed.

It added that Labour’s freeze on energy bills could deter investors, as returns on energy generation take a hit.

In contrast, a Conservative-led government would prioritise new solar and offshore windfarms, while cutting subsidies for onshore wind power, Glenigan suggested.

But the report claimed Labour’s planned retrofit programme could provide a significant boost to small and medium-sized contractors’ workloads.

The party plans to provide free energy efficiency improvements to 200,000 homes at risk of fuel poverty, and has pledged to offer interest-free loans for energy-efficient improvements for a futher one million homes.

The Liberal Democrats have taken proposals for retrofitting homes even further, pledging to spend £2bn a year from 2018/19 on energy efficiency improvements.

However, the government has already cut the funds available for home energy efficiency improvements.

For infrastructure, a Conservative-led government would pledge an extra £7.5bn on roads spending, but planned cuts to public expenditure on health, education and social housing programmes present a risk.

Last year, health and schools accounted for 12 per cent of all main contracts awarded in the UK, while social housing accounted for 10 per cent, according to Glenigan data.

Main contracts awarded in 2014:

  • Private housing: 24%
  • Private infrastructure: 18%
  • Office, retail, hotels: 18%
  • Public infrastructure: 13%
  • NHS, health, schools: 12%
  • Social housing: 10%
  • Industrial: 4%

Both main parties have adopted a ‘wait-and-see’ approach to the Davies Commission on airport expansion, while the Lib Dems are opposed to any net increase in runways.

The report describes a possible expansion of Heathrow as ‘at risk’ under a Conservative-led government, if UKIP gains enough seats to either form a coalition or play a part in supporting a minority government.

Equally, HS2 could be at risk under either a Labour or Conservative government, if support is needed from the Green Party or UKIP.

On housing, Labour’s ‘Mansion Tax’ is described as a “risk” by the report, suggesting it would likely dampen housing activity in London.

Both the Conservatives and Labour have pledged to build 200,000 homes by 2020.

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