Report: UK net zero economy worth more than £70 billion

The total gross value added by businesses involved in the net zero economy is more than twice that of the energy sector itself, finds the study. It also shows that 840,000 (3.2%) jobs are supported by businesses in the net zero economy, with an average wage of £42,600 compared to the £33,400 national average. The net zero economy is also highly productive, generating £112,300 in GVA per employee, 1.7 times higher than the national average of £64,400.

It reveals that the net zero economy is stronger and significantly more productive in the UK regions; the report also identifies twenty ‘hot spots' across the UK where net zero makes up a larger than average proportion of the local economy. These include the Tyneside/Teeside coast, south Yorkshire/North Derbyshire, the Mersey River and Cambridgeshire. London though lags behind, suggesting net zero is playing an active part in ‘levelling-up'.

Commenting Peter Chalkley, Director of ECIU, said: “From insulation fitters to heat pump engineers and agritech pioneers, businesses in the net zero economy are adding £70 billion to the UK economy.

“Billions of pounds of private sector investments are being made in net zero with the hot spots of activity being outside of London in places like Tyneside, Merseyside and Derbyshire.

“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 Rt Hon Dame Andrea Leadsom, MP for South Northamptonshire and former Business and Energy Secretary 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 Rt Hon Simon Clarke, MP for Middlesborough South and East Cleveland: “There is a nexus of expertise and excellence in the net zero economy in my constituency. It is green growth which is powering the recovery of regions like Teesside and Tyneside and is clear how both the levelling up agenda and the net zero agenda dovetail.

“Net zero is economically rational in its own terms, but this is now a race, and we cannot afford to be left behind by our partners in the US and Europe. If the Government can promote a positive green growth agenda, then communities like mine are exactly the kind of areas to both benefit from and deliver this green industrial revolution.”

Alexander Stafford, MP for Rother Valley: “My Rother Valley constituency is at the centre of a net zero economic hotspot across South Yorkshire and North Derbyshire which is worth £1.2billion to the local economies. The net zero transition presents a great opportunity for growth, with well paid jobs and thriving green industry.”

Tom Thackray, Director of Decarbonisation at the CBI said: “Upping the pace on the UK’s transition to net zero will challenge industries, businesses, and policymakers in the years ahead.

“This report underlines the real benefit to firms across multiple sectors - right across the country - of embracing that challenge. We can see how environmentally sustainable economic growth - for example, the development and scaling of renewable energy - will help stimulate economic activity across the UK and in turn help to reduce regional inequality.

“And while it is a challenge that businesses need to embrace, green growth is also one of the big opportunities in the coming years for the UK economy.”

New polling by YouGov released alongside the analysis has found that people in the Tyneside and Teeside net zero economic hot spot see ‘renewable energy and clean technology’ as the sector most likely to create long-term growth in the local economy [3]. 41% picked this sector compared to, for example, 24% selecting construction. They also say renewable energy and clean technology is the top sector the government should prioritise support for to generate more growth in the area. 46% of people selected it, compared to, 25% selecting construction.

The businesses within the 16 sub-sectors identified by the report are diverse. They include firms in the energy sector, including renewables, energy storage, demand response and efficiency and low-carbon heating; agritech and carbon capture; waste management and recycling; low-emission vehicles; and low-carbon consultancy and green finance.

Other key findings of the report include:

• Venture investment into the net zero economy is growing at a trend rate of over 30% per year. In 2021, venture funding into the net zero economy reached £710 million, over 10 times higher than venture investment into the oil and gas sub-industry, which saw a total of £49 million in venture investment.
• The economic impacts of the net zero economy are stronger within each of the regional economies; in some of the hot spots identified, it is contributing as much as 5-7% of an areas GVA, which outperforms London, where only 3.1% of its economy is made up by the net zero economy.
• The net zero economy is also highly productive in regions where productivity is historically lower. For example, the net zero economy in the Midlands (East and West) is over 2.5 times more productive than the regional average.

The net zero economy also creates high-skilled employment opportunities, reflected by higher than average wages. The report notes that further growth of green jobs will require a substantial redistribution from high-carbon to low-carbon jobs, seen as vital for levelling up [4]. To enable this, re-training and upskilling in many areas will be needed as the average skill requirement for a job in a carbon-intensive industry is 46% lower than the average net zero-related job. Jobs related to net zero are also in high demand, and green hiring overtook non-green hiring for the first time in 2019 and continues to rise. [5]

The diversity of businesses within the net zero economy also suggests that, as the UK transitions to net zero and more businesses are included in the sector, this will further redistribute economic activity. Already, areas such as the North East, Scotland, Northern Ireland, and the South West have the highest concentration of net zero economy businesses as a proportion of total businesses in the region. Expansion of the net zero economy therefore has great potential as an opportunity for regions across the UK to boost growth and reduce regional inequality. [6]