Net zero economy boasts 9% growth in 2023, vastly outpacing UK economy

The UK’s net zero economy grew 9% last year, a report commissioned by the Energy and Climate Intelligence Unit (ECIU) has found.

The analysis suggests the sector is flourishing compared to the UK economy as a whole, which grew by just 0.1% in 2023.

The ECIU, which is a non-profit group, commissioned CBI Economics and The Data City to draw up the new report. It found that the total gross value added (GVA) by businesses involved in the net zero economy now stands at £74bn. 

However, CBI Economics warned that without further investment and policy stability, growth in the sector could slow 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.

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

Louise Hellem, the CBI’s chief economist, said: “The UK’s transition to net zero brings immense opportunities for our economy. Our report, together with the ECIU, highlights how businesses are already seizing those prizes – creating jobs and attracting investment while 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.”

Hellem called on the Chancellor to establish a net zero investment plan that would identify green investment gaps and implement policy aimed at crowding in private finance.

Peter Chalkley, ECIU director, 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.”

In September, Rishi Sunak delayed a tranche of green policies, such as pushing back the ban on sales of new petrol and diesel cars from 2030 to 2035 and phasing out just 80% of new gas boilers, rather than all of them.

The Labour Party later ditched its pledge to spend £28bn a year on green projects if it wins the next election, following months of mixed messages on the plan.

The ECIU analysis found that 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.