The UK will “miss out” on economic growth unless it finally comes up with an industrial strategy to green the economy, the leading business group has warned.
As the UK economy has stagnated in recent years, the value of green industries like renewables, eco-friendly heating and energy storage is growing and will help unlock further cash for the UK, according to economists at the Confederation of British Industry (CBI).
They found that while Britain’s GDP growth was stuck at around 0.1% last year, its net zero economy grew by 9%, and attracted billions of pounds in private investment.
It argues private investment is key to unlocking growth.
The UK has committed to reaching net zero by 2050, but the report comes after Labour rowed back on its £28bn green investment pledge, and the Conservatives waged a rhetorical attack on climate policies.
Net zero means almost eliminating greenhouse gas emissions and requires changes to almost every sector, from food to housing, transport to construction.
The businesses implementing these changes – including solar panel installers and green finance advisers – added £74bn in Gross Value Added (GVA) in 2022-23, which is larger than the economy of Wales (£66 billion), according to the CBI Economics report.
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But analysts at CBI Economics and thinktank ECIU, which commissioned the report, warned “the strength of future growth is in jeopardy”.
Unless the UK draws up a “Net Zero Investment Plan”, it will lose out to places with larger economies with clear plans, like the US And EU, it said.
Louise Hellem, CBI chief economist, said: “Green growth prizes could deliver a boost of up to £57bn to GDP by 2030, but global competition is heating up.
She added: “If we can’t outspend our international competitors, we need to outsmart them. And the way to do that is really through ambitious policy frameworks that can direct capital into the UK’s green industries.”
Ms Hellem said the UK economy is “well-placed to be a world leader in this space”, given its “unique blend of advanced manufacturing capacity, world leading services industry and energy technical skills”.
“That means that investors do really see opportunities in the UK market.”
‘Real danger’ UK will miss out
Getting to net zero is likely to cost about £10bn a year until 2050, according to the Office for Budget Responsibility, which is roughly equivalent to the annual defence budget, though the majority of the cost is likely to be recouped in savings.
Many technologies that scientists believe are essential to the net zero transition remain extremely expensive, such as hydrogen and carbon capture and storage.
Adam Berman, deputy director of advocacy at industry group Energy UK, said public investment can “de-risk” these technologies and “crowd in” private sector cash, that can then bring down the price.
Jess Ralston from energy thinktank ECIU, said: “The UK is in real danger of missing out on more investment from negative rhetoric and U-turns around net zero, when the EU and US are offering clear plans and are willing to invest themselves.
“Investors want certainty and that comes from long term stable policy – whoever forms the next government will have to remember that, if it wants to see the net zero economy continue to grow.”
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