Report: Growing UK’s net-zero economy is a £70bn levelling up opportunity
The UK’s green economy contributed £71bn in Gross Value Added (GVA) last year, and, by expanding related sectors, even greater benefits could be unlocked, including in regions most in need of levelling up.
That is according to a major new report out from think-tank the Energy and Climate Intelligence Unit (ECIU). Produced in partnership with CBI Economics and Datacity, the report identifies dozens of net-zero ‘hotspots’ across the UK, where low-carbon industries are primed to grow and already account for 4-7% of GVA.
Many of these ‘hotspots’ are located in cities and regions which have been the focus of levelling up discussions in recent years, given their historic industrial activity. In terms of the current level of GVA provided by the so-called ‘net-zero economy’, Leicestershire and Warwickshire come out on top, with 7% of GVA in 2022. North-East Scotland and Shetland comes in second, with 6.5% of GVA.
If you were to look at the sheer number of full-time equivalent jobs, the top hotspot in 2022 was Greater Manchester, which boasted more than 26,770 roles. Thames Valley came in at a close second, with more than 25,600 jobs. Other job hotspots include Hampshire (18,900+ jobs) Leeds and Yorkshire (17,400+ roles) and North-East Scotland and Shetland (17,100+ roles).
None of the hotspots, in terms of jobs and/or GVA, are in Greater London. The South West also loses out.
Of the sectors which the report classes as being part of the ‘net-zero economy’, renewable energy planning is the largest, accounting for around 40% of the 20,000 businesses covered in the analysis. Other major sectors by business and employee count include recycling and waste management and renewable energy installation and maintenance. The businesses covered in the report span all parts of the value chain, from raw materials to consultancy and service-based firms. There is also a mix of SMEs and large businesses.
The report emphasises that the growth of these industries is not guaranteed by the fact that the UK has a legally binding net-zero target for 2050, given its failure to support that target with watertight policies for the near-term and medium-term. It highlights that venture investment in the net-zero economy has grown by 30% since 2019, but that investors may well choose other markets in future if there is more of an enabling environment.
As ECIU director Peter Chalkey puts it: “The net-zero economy is addressing levelling-up and the UK’s productivity problem, but with the EU and US investing heavily in clean technologies, the question now is will the UK keep up or try to stick with industries of the past?”
The ECIU frames delivering net-zero as an opportunity for the Government to deliver its ambitions on levelling up and on improving productivity. As such, it encourages readers in the policy space not to let immediate economic challenges and the need to deliver long-term climate planning be framed as two disconnected issues with separate solutions.
On productivity, the report reveals that the net-zero economy generates an average of £122,300 in GVA per full-time employee – 1.7 times higher than the national average. The figure is even higher in the East Midlands and West Midlands. It also confirms that creating net-zero jobs can be a route to better-paid jobs, with wages across the UK’s ‘net-zero economy’ in 2022 averaging £43,620, compared to the UK average salary of £27,756.
On levelling up, the ‘net-zero economy’ is s 24% more concentrated outside of London, when comparing the share of a region’s GVA contributed by the net zero economy. The opportunity is particularly strong in Scotland, which is targeting net-zero by 2045 and benefits from favourable wind and hydropower generation locations, as well as carbon storage in the North Sea. Scotland also boasts a large number of skilled energy workers that could be upskilled to transition out of the fossil fuel industry.
The report also highlights opportunities in the North-East of Wales due to expanding wind and solar stock.
Former Business and Energy Secretary Dame Andrea Leadsom has welcomed the report. She said: “The growth of new green industries in the UK, with the potential for global exports of technology and know-how, together with the need to phase out traditional fossil fuel use, offers great opportunities for green jobs, growth and ‘levelling up’ right across the UK.
“Unleashing private sector investment by freeing up planning and creating the right market structures is imperative to growing our £70bn net-zero economy further.”
The next UK Budget is due to be unveiled in mid-March. Chancellor Jeremy Hunt has stated that supporting low-carbon industries, along with tech and life sciences, will be crucial to ensuring a more innovative and stable UK economy in the long-term and to levelling up. He has said that the Budget will act as a ‘Growth Plan’ for these sectors, detailing new measures to bridge skills gaps and encourage further private investment.
The CBI recently warned that the UK risks squandering a £4.3bn opportunity between now and 2030 if it loses the global cleantech race.
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