Green Technology

CBI: Green Economy soars 9% compared to UK economy’s 0.1% growth



The UK’s net zero economy grew 9% in 2023 according to a new report commissioned by the Energy and Climate Intelligence Unit (ECIU), with analysis provided by CBI Economics and The Data City.1

The total gross value added (GVA) by businesses involved in the net zero economy now stands at £74 billion. This is in contrast to stagnation in the wider economy with GDP growth at just 0.1% in 2023.2 But CBI Economics is warning that without further investment and policy stability, the strength of future growth is in jeopardy as the US and EU compete to attract and develop clean industries.

The analysis found that jobs in the net zero economy are highly productive, generating £114,300 in economic activity, more than one and a half times the UK average of £72,550. They are also better paid by almost £10,000, the average net zero salary being £44,600 compared to the £35,400 UK average.

Scotland, Wales and the Midlands have particularly strong net zero economies with London having the lowest proportion of its economy based on businesses in net zero sectors.

Battleground constituency seats in England and Wales (based on new boundaries) are three times more likely to be a net zero economic ‘hotspot’.3 These seats include: High Peak, Stroud, Cheadle, Derby North, Lancaster and Wyre, Broxtowe and Hazel Grove.

Some areas with particularly high concentrations of net zero activity are amongst the most deprived in the country, for example, Hartlepool, Nottingham, Redcar and Cleveland are among the top 10% local authorities for income deprivation in England.

In addition, around two in three (65%) of the top 25 net zero hotspots and half of the top 50 net zero hotspots in England and Wales are classified as key electoral battlegrounds heading into the general election.

Louise Hellem, Chief Economist at the CBI, said: “The UK’s transition to net zero brings immense opportunities for our economy. Our report, together with the Energy and Climate Intelligence Unit, highlights how businesses are already seizing those prizes – creating jobs and attracting investment, whilst boosting our energy resilience. But we also know that there’s much work to be done to fulfil the UK’s potential, and accelerate our journey to net zero.

“Businesses continue to face difficult headwinds this year, leading many to pull back on investment plans. Where firms can invest, they want to see greater clarity on a long-term plan for our energy transition – or we risk failure to reach our net zero targets and missing out on sustainable, productivity-led growth.

“It’s clear that action is required to grow our net zero economy. In the CBI’s Spring Budget submission, we call on the Chancellor to establish a Net Zero Investment Plan – to identify green investment gaps and implement policy aimed at crowding in private finance. That’s one of many levers the Government can pull to support businesses in doubling down on green growth – but there are many more. We hope this report kickstarts a wider conversation about how the UK can realise those opportunities.”

Peter Chalkley, Director of the Energy and Climate Intelligence Unit, said: “Against the backdrop of economic stagnation, the net zero economy is bucking the trend, but it’s clear that the policy U-turns of the past year have damaged investor confidence at a time when the US and EU are investing billions to compete for clean industries. Thousands of jobs depend on net zero in constituencies right across the country, including many key battleground seats. The question now is will political parties provide the leadership, stability and investment needed to generate further growth or shy away from the global race for net zero.”

The analysis found that net zero businesses had received £279 million of public InnovateUK funding and £12.3 billion of private investment during 2021-2022. 2022 saw £1.5 billion invested in the low emissions vehicle sector, more than for example, the biopharmaceutical sector (£1.4bn). But the UK has fallen down the EY clean energy attractiveness index in the past year.4

Net zero economic sectors include renewable energy, energy storage, green finance and recycling.

Thomas Farquhar, Chief Commercial Officer at cleantech startup Heatio5 said: “The UK net zero economy is a vibrant, dynamic area to be a part of, offering huge opportunities for new, innovative businesses to grow. SME’s will be the driving force behind the Net Zero economy, and account for 61% of private sector employment. However, for this growth to materialise, it is imperative that Government provide policy consistency and unwavering ambition.

“Frustratingly, we are lagging behind the rest of Europe in the transition to cheaper, more secure and cleaner energy in homes. Countries like Norway have already transitioned 66% of their homes to low carbon heating, Sweden 43% and Finland 41% whereas the UK has less than 1%. When it comes to Solar the UK has uptake of 5% of suitable homes behind the likes of Italy at 23%, the Netherlands 16%, Germany 11% and further afield Australia with 31%. The numbers are startling and highlight the scale of the opportunity but necessity for investor confidence.”

Table 1: Top 25 Parliamentary Constituency net zero hotspots in England and Wales (GVA)

Parliamentary Constituencies (revised boundaries)

 

 

GVA

 

 

Name

 

 

Rank (by proportion)

 

 

Proportion of local economy

 

 

Absolute Value (£m)

 

 

Stockport

 

 

1

 

 

15.9%

 

 

375

 

 

Cheadle

 

 

2

 

 

15.9%

 

 

363

 

 

Hazel Grove

 

 

3

 

 

15.9%

 

 

363

 

 

Hinckley and Bosworth

 

 

4

 

 

12.0%

 

 

258

 

 

Havant

 

 

5

 

 

11.1%

 

 

225

 

 

Warwick and Leamington

 

 

6

 

 

10.1%

 

 

465

 

 

Gloucester

 

 

7

 

 

9.5%

 

 

272

 

 

Hartlepool

 

 

8

 

 

9.4%

 

 

133

 

 

Derby South

 

 

9

 

 

9.0%

 

 

289

 

 

Derby North

 

 

10

 

 

9.0%

 

 

263

 

 

Mid Leicestershire

 

 

11

 

 

8.8%

 

 

242

 

 

South Leicestershire

 

 

12

 

 

8.6%

 

 

250

 

 

North West Leicestershire

 

 

13

 

 

8.5%

 

 

297

 

 

Lancaster and Wyre

 

 

14

 

 

8.3%

 

 

135

 

 

Nuneaton

 

 

15

 

 

7.8%

 

 

150

 

 

Mid and South Pembrokeshire

 

 

16

 

 

7.7%

 

 

162

 

 

Taunton and Wellington

 

 

17

 

 

7.7%

 

 

178

 

 

Morecambe and Lunesdale

 

 

18

 

 

7.6%

 

 

165

 

 

Ashfield

 

 

19

 

 

7.5%

 

 

153

 

 

Broxtowe

 

 

20

 

 

7.3%

 

 

123

 

 

Nottingham North and Kimberley

 

 

21

 

 

7.2%

 

 

244

 

 

Nottingham East

 

 

22

 

 

7.2%

 

 

265

 

 

Nottingham South

 

 

23

 

 

7.2%

 

 

253

 

 

Stroud

 

 

24

 

 

7.0%

 

 

160

 

 

Selby

 

 

25

 

 

6.7%

 

 

182

 

 

 

Table 2: Top 10 Parliamentary Constituency net zero hotspots in Scotland (GVA)

Parliamentary Constituencies (2011 boundaries)

 

 

GVA

 

 

Name

 

 

Rank (by proportion)

 

 

Proportion of local economy

 

 

Absolute Value (GVA)

 

 

Perth and North Perthshire

 

 

1

 

 

19.4%

 

 

546.3

 

 

Gordon

 

 

2

 

 

19.1%

 

 

713.4

 

 

Aberdeen South

 

 

3

 

 

12.9%

 

 

475.4

 

 

Aberdeen North

 

 

4

 

 

12.5%

 

 

572.5

 

 

West Aberdeenshire and Kincardine

 

 

5

 

 

11.3%

 

 

291.7

 

 

East Lothian

 

 

6

 

 

85%

 

 

160.8

 

 

North Ayrshire and Arran

 

 

7

 

 

8.5%

 

 

117.6

 

 

Cumbernauld, Kilsyth and Kirkintilloch East

 

 

8

 

 

7.9%

 

 

178.3

 

 

Rutherglen and Hamilton West

 

 

9

 

 

7.8%

 

 

147.7

 

 

Banff and Buchan

 

 

10

 

 

7.5%

 

 

155.2

 

 

Notes

  1. The report, The UK’s net zero economy: The scale and geography of net zero economic activity in the UK, along with business case studies, and a recording of a media briefing featuring the CBI, Energy UK and Heatio spokespeople is available via this link: https://eciu.net/analysis/reports/2024/the-uks-net-zero-economy-2024
  2. ONS Data: https://www.ons.gov.uk/economy/grossdomesticproductgdp/bulletins/gdpfirstquarterlyestimateuk/latest
  3. A battleground is defined as one of the top 50 most marginal conservative seats according to the recent BBC analysis and ‘a net zero hotspot’ is one of the top 25 constituencies for the net zero economy in England and Wales.
  4. EY Renewable Energy Country Attractiveness Index: https://www.ey.com/en_gl/recai/are-the-global-winds-of-change-sending-offshore-in-a-new-direction
  5. Thomas Farquhar is Chief Commercial Officer of Heatio, a clean tech business developing a home energy platform and virtual power plant driving access to clean affordable energy for consumers by creating smart, connected, low carbon homes: https://www.heatio.co.uk/our-story