The transition to net zero presents significant economic opportunities UK-wide and has the potential to deliver sustainable, long-term growth.
To understand these long-term opportunities, we must take stock of how investments to-date have already supported the economy. The latest CBI Economics report, commissioned by the Energy and Climate Intelligence Unit (ECIU), assesses the contributions the net zero economy is already making.
The UK’s net zero economy is a bright spot for the UK economy
Using insights from The Data City, we determined that the number of businesses within the net zero economy grew 20% in the last year, with much of this growth derived from businesses who are bringing new technologies and solutions to the market and are predominantly SMEs. And they’re part of a larger ecosystem of net zero businesses which, together, generated £25 billion in Gross Value Added (GVA) and supported 218,500 full time jobs in 2022 – almost equivalent to the size of Sheffield’s workforce.
But they also rely on an extensive supply chain, so their economic contributions are far-reaching. When including its wider economic contributions, the net zero economy supports nearly 4% of UK economic activity - that’s £74 billion in GVA, a contribution larger than the Welsh economy and a staggering 9% increase on 2021 figures.
Due to the high-value nature of net zero activities, the jobs they employ are 60% more productive than the average UK job and pay nearly £10,000 per year more in average wages (£44,600), 23% more than the UK average (£35,400). In most regions, with the exception of London and the South East, the sector is twice as productive as the regional average, so the pay opportunities it provides to communities in these regions likely go a long way towards improving living standards.
Can net zero buck the UK’s worrying investment trend?
Tough economic conditions and a challenging political environment have left a mark on the UK’s international competitiveness and its ability to attract investment. A 2023 CBI Economics report found that a majority (57%) of firms interviewed as part of the project had a negative view of the UK market and a third (33%) of these firms were also able to outline a specific example of a lost investment or divestment in recent years due to UK market-specific factors.
However, the UK’s net zero economy remains attractive to investors – this is what is fuelling its remarkable growth. We found that net zero businesses attracted more than £20 billion in investment funding and foreign direct investment (FDI) in 2022/23. Of this, £6 billion was public and private sector funding received by net zero businesses, and £14 billion was foreign direct investment (FDI) into UK net zero businesses.
There is no north/south divide with the net zero economy
Every part of the country has the right ingredients to foster growth in net zero – whether that’s the natural capital advantages, the research capabilities or the established industry know-how.
Our analysis found that there are pockets of activity in various net zero sub-sectors dotted around the country, with Scotland, Wales and the East Midlands having particularly strong net zero economies, while London having the lowest proportion of its economy based on businesses in net zero sectors. In some areas, such as Stockport or Aberdeen, the net zero economy contributes as much as 16% of the local area’s GVA and 6% of employment.
Some of the largest net zero hotspots are found in the most deprived areas, such as Hartlepool, Nottingham or Redcar and Cleveland who are among the top 10% local authorities for income deprivation in England. More than 20% of households in these areas are income deprived.
Can the net zero economy play an important political role at the next general election?
In an election year, we wanted to understand the importance of the net zero economy to electoral battlegrounds, where political uncertainty is most likely to impact confidence and investment in net zero.
Our analysis found that Conservative-held electoral battlegrounds are more than 3 times more likely to be net zero hotspots. There are 7 Conservative held battlegrounds that were also in the top 25 net zero hotspots, including: Cheadle, Hazel Grove, High Peak, Derby North, or Lancaster. Mostly driven by renewable energy activity.
You can read the full report here.
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