This week’s topics:
- The likelihood of more road pricing to cover lost fuel duty revenues as we switch to EVs
- New data - UK investors are seeking accountability and reassurance from CEOs on ESG
- The knock-on impacts of the metaverse on different technologies
- The Financial Conduct Authority has pledged to become "a more assertive" regulator. What will it mean for the financial services sector?
The likelihood of road pricing to plug lost revenues from fuel duties
The recently announced 5p reduction in fuel duty brought to the fore one of the conundrums in transport policy - how to balance the often competing pressures of affordability and decarbonisation.
Grant Klein, public sector leader for transport, said:
- While the reduction in the cost of petrol and diesel will help motorists, it does go against the cornerstone of the Government’s net zero strategy - incentivising the uptake of electric vehicles (EVs). Government needs to use every lever available right now to encourage more people to switch to EVs before 2030.
- Changing car tax will have knock-on impacts on the use of trains, buses and even cycling. It’s important to look holistically at travel patterns across all modes of transport in deciding on anything that changes costs for any single aspect.
- If the government is successful in migrating us from fossil fuelled vehicles to EVs, this will create a £40bn hole in revenues currently generated through various levies. Road pricing such as through tolls and congestion zones, is the common cry to plug this gap.
- While this will be challenging to achieve, some form of pricing does now seem like a necessity.
- In the broader context, if road pricing can be made to work, the prize is potentially even higher - providing more options for how to balance funding and subsidies across various transport modes to achieve policy objectives. That may ultimately mean people getting bigger incentives for rail or cycling, or even for EV car travel in some circumstances.
- Simplicity is key to any road pricing scheme. That means a single primary objective, technology that is easy to deploy and use, and a pricing structure that is easy to understand.
New data - investors seek accountability and reassurance from the top on ESG
Data from PwC’s latest investor survey shows UK investors are increasingly looking to business leaders to take accountability for ESG issues. The report shows that:
- 68% of UK investors agree they feel more confident companies are on top of ESG risks if someone in the c-suite is accountable, and 59% think that should be the CEO.
- 74% of UK investors agree that how a company manages ESG risks and opportunities is an important factor in their investment decision making.
- 75% agree that they consider a company’s exposure to ESG risks and opportunities when screening potential investment opportunities.
- 85% agree that companies should embed ESG directly into their corporate strategy.
Hemione Hudson, UK Head of Audit, PwC, said:
- Investors are increasingly looking at non-financial reporting with greater scrutiny. They need assurance that public statements are underpinned by robust data, informed targets and clear milestones outlining how a company can achieve its goals.
- Right now, non-financial metrics are not held to account in the same way financial data is, so companies able to provide independently assured ESG reporting will gain a competitive edge with both investors and wider stakeholders.
Zubin Randeria, ESG lead at PwC UK, said:
- Businesses need to rethink the risks of traditional business models and explore opportunities for sustainable growth. Leaders need to ask themselves: what are the long-term ESG risks and opportunities? It’s about building profit with purpose.
Read the full UK investor survey findings here.
How the metaverse is powering different technologies
The metaverse represents a reboot of the internet, something which will be far more immersive and interoperable bringing huge potential for content owners and creators - music and video in particular. In video gaming, we are already seeing uploads of DIY games and concerts being hosted in video game environments.
PwC TMT Partner Simon Harris looks at the knock-on impacts on different technologies as the metaverse evolves:
- Successfully harnessing the metaverse’s potential will rely not just on strong intellectual property, but an understanding of how different technologies can support content creators.
- Artificial intelligence has a significant role to play, helping to curate an evermore bewildering level of consumer choice.
- Other technologies will need to advance to make the metaverse a reality, from hardware like headsets or augmented reality glasses to faster bandwidths via 5G and beyond.
- From a commercial perspective, there is a huge opportunity with NFTs and blockchain being the facilitators of commercial activity.
- But outside of gaming and luxury brands, I’m not yet convinced that owning NFT collectibles connected to music artists or TV shows will supersede other means of consumption.
- Trust will be a big factor and government bodies will need to consider how to govern the space.
What will the Financial Conduct Authority pledge to become "a more assertive" regulator mean for the sector?
The Financial Conduct Authority (FCA) published its Business Plan and three-year strategy last week, where it outlined its programme of work for the upcoming year.
Andrew Strange, PwC Financial Services Regulatory Insights leader, said:
- This year's business plan demonstrates the pivot the FCA is making to 'outcomes based regulation'. Gone are the days of a business plan centred on supervisory activity at a sector level, which is now replaced by 13 cross-sector priorities very firmly based on the good consumer outcomes the FCA wants to see.
- The FCA is both seeking to modernise itself as a more proactive 'data-led' regulator, while also improving firms' conduct and understanding of the regulator's expectations. It also focuses on promoting competition, in part to support UK competitiveness and innovation.
- While the business plan does not strictly provide new insights, it does comment on emerging issues such cryptoassets, with attention on both preventing consumer harm and facilitating innovation - a tricky balance.
- This year the FCA has begun to provide more clarity on the success metrics it will in part measure itself against; these provide firms with greater clarity on FCA's expectations but also may help firms to measure their own successes against new initiatives such as the Consumer Duty.
Something to read:
From ambition and investment scale to alternative energy sources, renewables, and North Sea resources, PwC energy experts give their take on the Government’s Energy Security Strategy.
Something to listen to:
In the latest episode of PwC’s Business in Focus podcast, Darren Hardman, VP and General Manager at Amazon Web Services, joins PwC partner David Allen to discuss if the skills crunch will slow the digital transformation boom.
Something to watch:
How cloud and digital transformation has helped the UK's largest music education body, ABRSM, digitise its decades-old processes to enable online tests, happier clients and increased revenues.