Caption. Image: 

Auto credit

The numbers behind the Green Revolution just don’t stack up

The cost of driving green is not cheap and for the 14 million UK adults who can’t access mainstream credit, the outlook remains unclear. Malcolm Le May, the CEO of Provident Financial Group, a specialist bank focused on underserved markets, including motor finance credit, offers his take on the direction of Green Revolution.

Revolutions by their very nature, tend to have winners and losers. Looking back, the agricultural and industrial revolutions are prime examples.

In my view, at the moment, we’re going through a technological and green revolution. The key question is, how do we do this without broadening the divide between the haves and the have nots, like in previous revolutions?

The technology revolution has just predominantly focused on consumer goods, rather than essentials, like energy or housing. Computers, televisions, and mobile phones, for example, have become significantly cheaper over time, driven by massive technological change and improvements in the manufacturing process.

Malcolm Le May, the CEO of Provident Financial Group. Credit: Provident Financial Group

Notwithstanding the current inflationary headwinds over time, some essential goods like food, drink and clothing have also benefited from some technological innovation and globalisation, and in effect come down in price with increased choice for consumers.

Energy and construction though, have changed little in comparison. Buildings have been built with bricks for over a thousand years, and mankind has burnt fossil fuels to create energy or warmth since the dawn of time. Technology has made things easier and quicker, for example in the extraction of fossil fuels, but the fundamentals have not really changed. Fuel in the vast majority of cases still comes out of the ground and is burnt to create energy. Price has been driven by demand and supply, not by big advances in technology.

At its core, and because of climate change, the green revolution is an attempt to change all of this by reducing our high dependency on fossil fuels, the companies that produce them, and consequently the countries that own the natural resource. Whilst this is clearly the right thing to do for the long-term sustainability of the planet, how do we do this without repeating the mistakes of past revolutions, and creating winners and losers?

As the CEO of a bank, you may be wondering why do I care? Well, our customer base isn’t like that of the traditional High Street Banks, but nonetheless they represent 1 in 5 of the population. How our customers live, and what they want, is no different to anyone else, except they do pay more to access credit due to their circumstances. Our customers typically work full time, earn slightly above-average earnings, and rent or own their homes. What they have often experienced, which makes them different to High Street Bank customers, is some sort of credit event. They could be new to credit, had a problem with credit in the past, or be recovering from some sort of life event, like divorce or time out of work, which impacted their credit score.

Driving green

This means PFG can help them when others won’t. A typical customer of our vehicle finance business will buy a second-hand car, probably a Ford Focus, over three years, with a loan of about £8,700. At present, the average electrically powered vehicle equivalent will be c£14,000. We have about 34 million cars in the UK, of which 1.2 are alternatively fuelled. So, even with advancing battery technology, and increased supply, the demand for them, and therefore the price is not going to come down materially soon, and nor is the supply going to increase significantly in the short-term.

Also, will everyone have easy access to the charging infrastructure required for electric-powered vehicles? The government’s policy on petrol and diesel cars is that no new cars powered solely by these fossil fuels can be sold after 2030. Though you can still drive a petrol or diesel car after 2030, you just can’t buy a new one. So, if our customers can’t afford a battery-electric car now, and supply is not going to reduce the price significantly by 2030, what are they supposed to do? Well, the only thing they can do: drive an ageing petrol or diesel car, with the pollution and increasing cost, as our customers still need to get to work, take their kids to school, or visit their friends and family. This cannot be good for them, for society as a whole or for the climate.

Cost of going green

Now, just to be clear, I’m not a climate change denier, at PFG we aim to be net-zero in greenhouse gas emissions by 2040, as clearly we need to reduce our carbon emissions significantly so we as a country can achieve our UN Climate Change Conference (COP26) commitments. In fact, what recent events have shown us is we need to reduce our dependency on fossil fuels even faster. The point, though, of this article is have we really worked out how we’re going to achieve it, and how do we stop leaving people behind? The agricultural and industrial revolutions delivered great strides forward for society, but not for everyone.

In a modern society, it should be the sole aim to ensure that no one is left behind or suffers from a revolution. At present, the numbers for the green revolution just don’t stack up, and they don’t work easily for the customers of PFG. I know going green is equally important to them, as it is to everybody else, but I think they’re going to need some more government help or financial support. Whilst I don’t have all the solutions for what this help should be, I am committed to championing our customer’s needs and raising them with the regulators, government and politicians so that we get a plan for everyone going green, not just those that can afford to. Levelling up, through providing equal opportunities across the country, is central to the government strategy, and an aim I support. As part of the government’s levelling up scheme, we should help everyone to go green, so we don’t leave people behind and repeat the mistakes of past revolutions.

Provident Financial Group (PFG) lends through Moneybarn Vehicle Finance.