Trudeau says government spending needed to ‘crowd in’ private investment, in sales pitch to Bay Street
Prime Minister Justin Trudeau pitched his government’s budget to Bay Street on Tuesday, arguing that billions in new government spending on green technology was needed to “crowd in” private capital, while offering a populist message that “real wealth” is not created on bank trading floors.
In a Tuesday evening speech in Toronto, Mr. Trudeau focused on the green industrial policy promises in the latest federal budget, unveiled two weeks ago. These add up to $21-billion in new spending over the next five years, largely in the form of tax credits to encourage private investment in low-carbon technologies.
The government made its green spending blitz in response to massive U.S. subsidies contained in last year’s Inflation Reduction Act. The U.S. government plans to spend around US$370-billion in the coming years to help decarbonize the American economy, sparking concerns in Canada about competitiveness and capital flight south across the border.
Mr. Trudeau framed his government’s response to the U.S. act as a pro-active move.
“Our budget is not a defensive economic posture,” he told business leaders gathered at a conference hosted by Bank of Montreal and Eurasia Group.
“The strategic clean economy investments we’ve been making since 2015 are about growing the economic pie for everyone, and securing new investment opportunities for a lot of you here on Bay Street.”
The measures in the budget include an investment tax credit for clean energy manufacturing that is worth $4.5-billion over five years and a tax credit for clean hydrogen production, worth $5.6-billion. The government has also launched a $15-billion fund aimed at investing alongside private-sector investors in low-carbon projects.
While Mr. Trudeau highlighted the investment opportunities created by the green energy transition, he also took a passing swipe at the banking sector.
“Real wealth isn’t made on the trading floor. It’s created in factories, in fields, in labs, in mines,” he said.
“People are the engine of our economy. We can never forget that. And I proffer this warning, because there was a time not too long ago, when the establishment seemed to lose sight of that,” he said, highlighting earlier drives for lower regulations and what he called “unencumbered globalization.”
Ottawa has not been shy about tapping Bay Street for additional revenue over the past two years. The budget announced plans to amend tax treatment on dividends of Canadian shares held by financial institutions, which is expected to yield $3.15-billion in taxes over five years.
That follows two measures in the 2022 budget: a one-time 15-per-cent tax on bank and insurance company income above $1-billion, and a 1.5 percentage point increase on their corporate income taxes for profits over $100-million.
Governments are continuing to push investment into clean energy amid the global energy crisis – News – IEA
The amount of money allocated by governments to support clean energy investment since 2020 has risen to USD 1.34 trillion, according to the latest update of the IEA’s Government Energy Spending Tracker. Around USD 130 billion of new spending was announced in the last six months – among the slowest periods for new allocations since the start of the Covid-19 pandemic.
This slowdown may be short-lived, however, as a number of additional policy packages are being considered in Australia, Brazil, Canada, the European Union and Japan. Already, government spending is playing a central role in the rapid growth of clean energy investment and expanding clean technology supply chains, and is set to drive both to set to drive both to new heights in the years ahead. Notably, direct incentives for manufacturers aimed at bolstering domestic manufacturing of clean energy technologies now total around USD 90 billion.
At the same time, governments continue to increase spending on managing the immediate energy price shocks for consumers. Since the start of the global energy crisis in early 2022, governments have allocated USD 900 billion to short-term consumer affordability measures in addition to pre-existing support programmes and subsidies. Around 30% of this affordability spending has been announced in the past six months.
These measures have had a major role in moderating price increases for end users, but the energy crisis nonetheless took a toll on many people’s budgets. According to the IEA’s latest data on end-user prices across 12 countries, which together represent nearly 60% of the global population, the average household spent a higher share of its income on energy in 2022 as energy prices outpaced nominal wage growth. On average, households in major economies spend between 3% and 7% of their incomes to heat and cool their homes, to power appliances and to cook – though shares are higher for low-income households. In most major economies, the share of income spent on energy moved up by less than 1% thanks to government interventions.
At the pump, consumers felt the impact more acutely, especially in emerging markets and developing economies, where transport fuels accounted for the joint largest increase in household spending in 2022 alongside food. Without government intervention, this would have been much higher. This was the case in Indonesia, where the average household total energy expenditure would have tripled in 2022 were it not for affordability support.
Early numbers for 2023 show that wholesale energy prices are easing. However, retail prices are unlikely to fall as quickly. High prices are already making clean energy technologies more cost competitive, notably electric vehicles and heat pumps, which saw record sales in 2022. As high prices persist, the uptake of clean energy technologies is set to accelerate further, hastening the emergence of the new energy economy.
Brexit scaremongering proven wrong as London seals major investment in Europe – GB News
The UK attracted the highest amount of inward direct investment in 2022, extending its lion’s share of the European market to more than a quarter.
Releasing figures sure to infuriate pro-EU activists, the annual Ernst & Young (EY) attractiveness survey found foreign investors flocked to the City to fund 46 financial services projects last year, up from 39 in 2021.
By comparison, second place Paris enticed foreign investment for 35 finance proposals, sliding from 38 in 2021, while Madrid secured 22 foreign investment projects compared to 29 in 2021.
Anna Anthony, UK financial services managing partner at EY, said: “Investors recognise the strength, gold-standard governance and resilience of the UK’s financial system and see it as the preferred destination for growth, innovation and access to top talent.”
The Square Mile continues to be a beacon of prosperity
Overall, the UK attracted foreign investment to 76 financial services projects in 2022, a 17 per cent rise on the 63 projects in 2021.
It puts clear blue water between the UK and France, which recorded 45 projects in total, down 15 on 2021 figures.
Andrew Griffith, economic secretary to the Treasury, told City AM: “We have a tremendous track record of attracting the brightest and best companies in the world built on the long standing competitive advantages of the UK and its attractiveness as a place to do business.”
The UK has topped EY consultancy’s finance foreign direct investment table every year since the research started, including every year since the 2016 Brexit vote.
Andrew Griffith pictured second to the right
Likewise, London has led the European city table since it was first recorded in 1986.
America was the biggest source of foreign investment in financial services in Europe last year, accounting for 21 of the UK’s 76 projects in 2022.
Financial services investment projects created 2,603 jobs in the UK last year, a rise of four per cent on 2021.
Across Europe, 10,700 new jobs were created in financial services, of which 1,700 were recorded in France.
EY’s home in Canary Wharf at 25 Churchill Place
Cushman and Wakefield
Chris Hayward, policy chairman at the City of London Corporation, said: “London continues to lead Europe in attracting foreign direct investment in financial services, and the sector is proving resilient despite the global challenges facing the UK economy.”
Hayward added: “That is good news for every household, because a strong City creates the wealth and jobs that support the economy and fund our public services.”
EY has undergone a UK leadership shake up recently following a collapse in the consultancy firm’s plan to break up its audit and consulting operations globally.
The break up blueprint, coined ‘Project Everest’, attracted fierce internal criticism and was eventually abandoned but not before it had cost the firm £480million worth of internal work.
On the back of ditching the radical overhaul, EY has shrunk the UK executive committee from 13 to eight and announced that it will cut 3,000 jobs in the US.
The big four consultancy firm reported record levels of growth for its UK business in November 2022, with UK revenues up 17.2 per cent and UK fee income increasing to £3.23billion from £2.75billion.
Investment grade will boost realty
The local property market stands to reap significant benefits, both short-term and long-term, from a likely credit rating upgrade to investment level for Greece.
Industry executives say that would be a very positive development, as, after 14 years, the Greek real estate market will return to the “elite” of investment destinations and it will become easier to attract foreign investment groups and funds.
“There is an objective problem right now regarding the implementation of investments by a number of institutional investors, as there are rules that prohibit the placement of funds in countries below investment grade. In other words, even if there was an investment opportunity and they were willing to take the risk, such an investment would be cut off by the investment committee of the respective group, because it is not allowed to invest in countries that do not have a positive credit rating,” Tassos Kotzanastassis, ULI global management committee executive and CEO of international real estate investment management company 8G Group, tells Kathimerini.
Securing investment grade means the Greek property market will get back on the “radar” of large institutional investors and state groups that have a long-term investment horizon. This is a development that contradicts speculative moves by a portion of institutions that have been placed in Greece, with a purely short-term horizon, aiming to secure a quick profit and exit from the country.
However, as Kotzanastassis warns, new investments from large foreign funds should not be expected, at least not immediately. “In this period, at the international level, there is significant uncertainty and investors appear restrained. Many are looking for investment opportunities in the form of distressed assets,” he emphasizes.
One of the market’s perennial problems is it is shallow, so it is difficult to create economies of scale that maximize the return on an investment. Another key point is that all foreign investors of this scope are looking for properties with green characteristics, in the context of the ESG policy they follow. Such properties are still rare in this market, constituting a very small minority in relation to the total stock.
Wall Street’s Blackstone Made Billions in Real Estate Bet on Urban Warehouses – Bloomberg
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