Environment Analyst Business Summit delegates reach Brexit acceptance and eye opportunities through resetting of UK green policy. Also how the Tory leadership race will have a critical bearing
3 July 2019 / UK
After three years of speculating the debate over Brexit has transitioned from what to why, and from when to how. This was the consensus from the annual Environment Analyst Business Summit, where 90+ senior executives from across the industry gathered in London on 19 June to discuss the most pressing challenges.
For the environmental consultancy sector, the shock felt at our 2016 EA summit - which came a few weeks after the vote – led the ‘B’ word to dominate the day (EA 06-Oct-16). Yet fast forward to the 2019 event and it seems that much of the fear about Brexit seems to have dissipated.
In a few months’ time, the UK may crash out of the EU without a deal, however speakers and delegates seemed remarkably upbeat about market prospects. The uncertainty that has dogged the UK for three years seems to have fostered a stiff-upper-lip attitude and a preference for talking up the opportunities rather than risks.
Fitting then Environment Analyst chose Capitalising on a climate of uncertainty as the Summit title (EA 26-Jun-19).
Matthew Farrow, executive director at the Environment Industries Commission (EIC); Henry Dieudonné-Demaria, lead for climate strategy at the Department for Environment, Food and Rural Affairs (Defra) and Julian Rose, managing director at Environment Analyst offered their views on key policy developments shaping the environmental management and services space.
The resurgence of Defra
Of course it is impossible to talk more generally about policy drivers without mentioning Brexit, but the dialogue over the last few years has become gradually more positive. Defra’s Dieudonné-Demaria shared his insights into how Brexit has changed the focus of the government department.
"In the three years I have been at Defra, we have gone from a department of effective administration and adaptation of policy, to now where we realise we need to be generating - with all of our stakeholders - our own policies," says Demaria. "That has been a heck of a culture shift that has required us to change structures, and bring in new skills and capacity. We can’t get people in quick enough."
Research undertaken by the Institute for Government showed the number of FTE staff at Defra had fallen by half between 2010 and 2016. But by March this year, staff numbers had surpassed the previous 2010 peak. Former permanent secretary of Defra Clare Moriaty estimates that over 80% of its workload is now framed by Brexit, with the department growing in each of the last nine quarters (see figure 1).
Figure 1: Percentage change in civil service staff numbers (FTE) by department, September 2010 to March 2019 (Source IfG)
But Farrow was quick to point out that the quantity, complexity and speed with which Defra has had to respond to the changing policy landscape - notably the need to transpose over 1,200 European rules into UK statute books - could set the stage for lawyers to get more involved. Let’s not forget the EU’s Acquis Communautaire underpinned around 80% of Defra’s workflow - so will the new legal frameworks prove watertight?
"Broadly there are a lot of things happening in environment policy; I am wondering if we may see the start of a more litigious approach?" he asks. Farrow then alluded to the era when former Prime Minister Gordon Brown floated the idea of every UK citizen having environmental rights, before he was talked out of it because the prospects of thousands of legal challenges against the government.
"This setting is coming back, I am surprised we haven’t seen more class actions to date, particularly around air quality," Farrow adds.
Long-term policy drivers
Much of the long term policy framework will depend on what deal the UK secures from the EU - and there are many factors influencing this. During the 2019 EA Business Summit we asked delegates what they thought the outcome would be for the UK: deal or no deal. Around 38% of respondents anticipate getting a deal of some sort, compared to 28% who forecast a ‘no deal’ scenario, leaving a sizable proportion remaining uncertain (see figure 2).
Figure 2: EASummit19 Brexit poll findings
If the UK secures a deal Farrow remains convinced the UK will remain in high regulatory alignment with the EU for sometime: "For many years the NGO fear has been that Brexit would herald a race to the bottom on environmental standards once we left. I always felt this was overstated, unless the UK ends up with a no-deal."
Environment Analyst’s managing director Julian Rose provided a much more cautionary note, however, on the state of UK politics:
"No-deal Brexit is now a real possibility. What I find unusual is we seem to have a situation where economic stewardship is no longer the priority for political leaders. We seem to have gone back to the 1970s where the chances of getting cross-party political consensus seems impossible right now."
Dieudonné-Demaria was clear from the outset his position within Defra precluded him from talking about the government’s policy on Brexit. Nevertheless he could outline a few of the longer term trends in environment policy which the department is working towards irrespective of the outcome of Brexit.
First, Defra will continue to work towards longer-term approaches to setting environment policy following the success of the Climate Change Act and the 25-Year Environment Plan.
Secondly, the rise of the natural capital approach will see "public money for public goods" dominate future decision making. A good example will be the replacement of the Common Agricultural Policy with the Environmental Land Management System with funding allocated for environmental services and benefits, rather than acreage of land farmed.
Thirdly, the increasing understanding of the economic costs of environmental management will see the polluter pays principle given a new lease of life. While not a new concept by any means, Defra is looking closely at how you use it to incentivise and dis-incentivise private sector activity.
A further point made by Dieudonné-Demaria is that data and the quantification of impacts will see environmental management become less about regulatory compliance, and more about governance and accounting. This is already the case in government departments, such as the Treasury.
Farrow added his own observational trend into the mix: the current prominence of a multitude of environmental issues and at the same time.
"In previous government policy round-ups and perspective pieces I have often pointed out the trending environmental topic of the year," he says. "This [often over-generalised] view of the policy landscape can be a useful way to consider what issues really cut through the noise. In 2015 we had air quality (EA 03-Mar-16), in 2016 it was climate change (EA 15-Nov-16), in 2018 we had plastics (EA 11-Dec-18).
But Farrow believes 2019 to date has been a little different: "What I think is unique at the moment is almost every major environmental issue seems to be big at the same time," which could be significant indicating a tipping point of awareness.
"Today net zero is back in a big way, but so is biodiversity net gain, natural capital, air quality and water resources. There is also some great work being done to understand systems-level interactions and the draft Environment Bill responds to that and tries to integrate systems in a robust way."
Boris the bold?
Farrow’s position outside of the civil service enabled him to speculate on the future direction of government policy, and particularly on the environmental priorities of a government led by would-be PM Boris Johnson, who remains the runaway favourite to become elected by Conservative Party members later this month.
While there has been media criticism of Johnson’s environmental record, Farrow pointed out that London’s ultra-low emission zones, ‘Boris bikes’ and electric buses came under his city mayoralty - albeit very late on. His protests over Heathrow Airport were largely based on concerns of noise levels to residents living in west London.
The UK potentially playing host to COP26 next year would also provide an opportunity for Johnson to relish the limelight on the world stage - perhaps using the platform to launch more policy initiatives to support the UK’s recent net-zero pledge (EA 27-Jun-19).
Perhaps more importantly is the role Michael Gove may play in all this. Farrow praised Gove for breathing new life into Defra and for being "the most effective environment secretary since Labour’s David Milliband". The sketchy relationship between Johnson and Gove may see the former confined to Defra in a bid to keep him away from more high-power positions - thus keeping a high profile politician in the Defra mix with all the leverage that provides.
For environmental consultants Farrow believes real prospects could arise from Boris Johnson’s Victorian-esk penchant for committing to grand infrastructure projects - which may be welcome news given the recovery of the environmental consultancy market post-recession has largely been driven by the upswing in infrastructure and development activity, which has as a sector on its own added in excess of £300m in annual EC market revenues since 2012.
We don't have to look too far back to remember Johnson’s eye-wateringly expensive suggestions a new airport could be constructed in the Thames Estuary - nicknamed the Thames Hub or Boris Island. A project which countered the need for the now-accepted Heathrow third runway. Johnson has reportedly already asked the former HS2 chair Douglas Oakervee to look at the business case for HS2.
What is clear from the policy experts above, and the general mood of the summit, is that the environmental industry sector may have reached the crucial fifth phase in the five-stages of [Brexit] grief: denial, anger, bargaining, depression and...acceptance.