x Abu Dhabi, UAEFriday 28 July 2017

UK's £110bn power plant programme gets the nod

George Osborne, the UK finance minister, will today try to lift a pall of economic gloom made darker by figures yesterday that showed the construction sector unexpectedly contracted last month.

George Osborne, the UK finance minister, will today try to lift a pall of economic gloom made darker by figures yesterday that showed the construction sector unexpectedly contracted last month.

As part of a £110 billion (Dh651.41bn) programme to replace ageing power plants and reduce greenhouse gases, Mr Osborne is scheduled to outline plans to build as many as 30 new gas-fired power stations, adding detail to proposals to overhaul energy use in the United Kingdom, people familiar with the plan said yesterday.

"We are committed to solving today's problems, but also preparing for tomorrow's challenges by investing in our future and equipping Britain for the global race," a UK treasury spokesman said.

Mr Osborne is likely to set out details in today's autumn budget statement, according to the people, who declined to be identified. The new power stations will generate about 26 gigawatts of energy, more than a quarter of the UK's current generation capacity.

Ed Davey, the energy secretary, has said he would allow utilities to triple the renewable energy levy that comes through in household and business power bills to £7.6bn by 2020.

The government's gas strategy will say Britain may need more capacity than it does now. It will say there could be 37 gigawatts of plants by 2030, accounting for half of all energy generation, the people said.

Mr Osborne will also explore whether he should give tax breaks for shale-gas exploration. He will look at creating a body called the office of unconventional gas to allow industry, consumer groups and environmentalists to settle disputes and to regulate the sector.

The energy deal struck last month represented a compromise between the Conservatives, led by David Cameron, the prime minister, and their Liberal Democrat coalition partners. Mr Cameron's party has raised concerns about the costs of reducing emissions from electricity generation, while the Liberal Democrats have emphasised the need for greener sources of power.

Mr Osborne repelled Mr Davey's effort to have an immediate goal for removing carbon from utility emissions, known as a "decarbonisation target", a move criticised by the environmental pressure groups WWF and Greenpeace.

There was some good news yesterday regarding other projects in the pipeline. Mr Osborne said the government would invest £5bn in schools, science and transport capital developments, funded by departmental savings across the next two-and-a-half years.

News of the planned investments came as a UK construction index yesterday surprised industry experts by showing a contraction last month as orders declined at the fastest pace for more than three and a half years and confidence dropped to its lowest level since 2008, Markit Economics said.

An index of activity decreased to 49.3, the lowest reading since August, from 50.9 in October, Markit and the Chartered Institute of Purchasing and Supply (Cips) in London said yesterday. The median estimate of nine economists in a Bloomberg News survey was 50.5. A reading above 50 indicates expansion.

On a slightly brighter note, British retail sales edged up last month as shoppers hunted for cheap Christmas gifts, the British Retail Consortium said yesterday.

Total retail sales rose 1.8 per cent in value terms on the year, up from 1.1 per cent growth in October.

But the mildly optimistic news did little to erase the cloud of doubt hanging over the building industry. Lower levels of construction last year were driven by "solid reductions" in house building and commercial activity, with the latter declining at the fastest pace since December 2009, yesterday's Markit report showed.

This confirms "the sector's return to contraction and the lowest levels of confidence seen since the height of the economic crisis in 2008", said David Noble, the Cips chief executive.

"Parallels to darker days of the economic crisis can be seen in the construction sector, which is under pressure from all sides."

* Bloomberg News