The government is right to stress the potential of ‘green growth’ as new analysis from the Tony Blair Institute for Global Change (TBI) and Oxford Economics reveals green industry could boost UK GDP by up to 5 percent over the next 25 years.
But if the government wants its overall growth strategy to succeed, it must be hard-headed about the choices it makes in ‘going green’. The report argues the government should:
Be cautious about over-selling the job opportunities from green manufacturing as the green transition is unlikely to drive a revival in UK manufacturing employment. Instead, green services offer twice the job opportunities for the UK.
Reallocate some of the £2.5 billion in extra funding it has committed to the steel industry to high growth sectors. While there are good arguments for offering some support to steel on strategic and regional employment grounds, its potential to boost growth is limited.
Despite the complex security relationship, the government should seek to attract investment from China’s leading EV manufacturers to safeguard the UK’s position as a major auto producer in the long-term.
The government should also not over-rely on the contribution of ‘green’ growth to achieve its growth mission.
The analysis shows that if the UK fully capitalises on the net zero transition, green industries could grow from 0.8% of GDP and 200,000 jobs in 2022 to 5.8% of GDP and 1.2 million jobs by 2050, providing a significant boost in a time of slow growth.
But this outcome is not guaranteed. Global competition to capture the opportunities from the green transition is fierce. And if the UK continues on its current path, green industries are expected to reach only 1.6% of GDP and 350,000 jobs by 2050, barely replacing the decline of carbon-heavy ‘grey’ industries.
Relying solely on green growth would be a mistake. While it should be an important part of the UK’s strategy, it cannot be the only focus. To succeed, the UK must build multiple engines of growth – including AI and other related sectors - and not skew its strategy too heavily towards ‘green’.
With the government due to publish their modern industrial strategy in the coming months, TBI is calling for the government to adopt a new hard-headed approach that breaks the past cycle of short-term planning and inconsistent decision making, and ensures the UK is properly set up to capitalise on growth opportunities of the future. The report sets out a roadmap for reform, including:
A new strategic framework to guide sector prioritisation, ensuring resources are directed to projects with genuine potential to create future prosperity and reduce the risk of costly policy reversals when decision-makers change.
A cross-cutting set of policy actions to remove barriers to industrial success—from helping to scale the next generation of innovative British firms by streamlining access to government financial support to making the UK’s regions more attractive for investment.
A governance overhaul, including a Cabinet-level Industrial Strategy Board, chaired by the Chancellor to make decisions, and sector tsars to drive delivery, complementing the new Industrial Strategy Advisory Council.
TBI Director of Economic Policy, Tom Smith said:
“For too long, UK industrial strategy has been plagued by zigzag policymaking and poor execution, with strategies barely outlasting the political cycle. The government must break this cycle with a hard-headed plan that investors can trust – a plan that confronts difficult trade-offs, makes bold strategic choices and acts with urgency.
“The stakes are high, and so are the opportunities. As other countries race ahead, the UK must carve out a strategy that plays to its unique strengths – or risk falling behind. If the government is serious about driving growth, their modern industrial strategy must adopt a new approach, as set out in this report, to seize this pivotal moment and ensure the UK is prepared to compete in the industries of the future.”