A report on the net zero economy – sectors working to deliver reduced emissions – found growth of 9% was achieved last year in the UK.
‘The UK’s net zero economy: The scale and geography of the net zero economy in the UK’ paints a positive picture of growth in contrast to the wider economy.
Produced by the Energy & Climate Intelligence Unit (ECIU) and the Confederation of British Industry (CBI) Economics this week, the report also finds that this growth was distributed across the UK, rather than concentrated in London, in a boost to ‘levelling up’ ambitions and efforts to reduce regional inequalities.
The sector saw growth of 9% last year and was valued at £74b, 3.8% of the economy. ECIU’s ‘Net Zero Tracker’, created in collaboration with the University of Oxford, also found that 92% of global GDP is now covered by a net zero commitment. Foreign direct investment (FDI) associated with net zero projects was found to be £20bn.
This growth translates to new job creation with an estimated 765,700 full time equivalent (FTE) jobs supported by net zero sectors, equal to nearly 3% of total UK employment. The report also notes that, due to the high-value nature of net zero activity, the jobs they employ are 1.6 times more productive than the average UK job, generating £114,300 for the economy per year. This was reflected with the average wages of those in these sectors outstripping the UK average by 23% at £44,600, compared to £35,400. The report notes that the economic gains and jobs created aren’t London-centric, creating the “potential to deliver sustainable growth UK-wide, rather than creating further income inequalities”. Illustrating this is the relative importance of net zero to the Scottish economy, with 85,500 jobs created, or almost 4% of employment. Net zero also contributed £8bn in gross value added (GVA), approximately 5.7%.
Other regions where a significant proportion of GVA comes from net zero include East Midlands (4.6%), West Midlands (4.3%) and Wales (4.6%).Regions have also taken a strong share of inwards investment – the West Midlands saw the highest levels of net zero-related FDI projects between 2022 and 2023 (16% of the UK’s total), which created 3,145 new jobs in the region.
Peter Chalkley, director of the Energy and Climate Intelligence Unit, said that the findings “remind us that under the headline figures are real jobs in towns and cities up and down the country”. However, the report also came with the caveat that net zero growth needs consistent support from government in order to sustain this momentum. Chalkley also said that in contrast to the US and the EU consistently building new green policy measures in recent years, “the UK has been chopping and changing”.
These mixed signals, policy U-turns and contradictory political rhetoric have consequences, increasing the political risk premium for investors considering putting their money into the UK. Concerns about inconsistency were echoed by Professor David Bailey last month at UK in a Changing Europe’s (UKICE) economic conference, who remarked that the fragmentary nature of the UK’s green industrial policy so far – a mix of nascent battery strategy, a new Critical Import Strategy, and funding allocated to electric vehicles – was holding the UK back from achieving net zero. He concluded “it doesn’t add up to strategy and the sums on offer are a fraction of what’s available in the EU, US and China”.
Manufacturing
EU businesses will need to keep better tabs on their supply chains in order to adhere to reporting rules stemming from the new Carbon Border Adjustment Mechanism (CBAM).
CBAM, a new tax on high-polluting imports, designed to prevent ‘carbon leakage’ – the process of offshoring polluting processes further down the supply chain – has begun its reporting phase. From 1 October 2023 to 31 December 2025, EU businesses will need to submit quarterly reports on the amount of emissions associated with their products, obtaining relevant data from their suppliers.
UK firms are advised to prepare relevant data to share with their EU customers and keep lines of communication open as the reporting phase continues.
For further information on CBAM see: https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en