Looking at the challenges and opportunities of the net zero transition across the nations and regions of the UK.

About this project

The transition to a low carbon or ‘green’ economy is of particular interest and importance in the lead up to the 2021 United Nations Climate Change Conference of the Parties (COP26) which will be hosted in Glasgow in November.

During this critical year there is a need to ensure that actions coming out of COP26, as well as other government climate policies, are relevant to all the UK’s nations and regions. 

For this second phase of our research with Oxford Economics we look at how different parts of the UK could be impacted by the challenges and opportunities that will emerge from the net zero transition.

Download the full report to read about the regional findings in more depth.

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Seizing the green growth opportunity

The first stage of our work with Oxford Economics, published in July 2021, collated existing research to help tell the national story of the opportunities and challenges that the green economy presents for the UK.

A significant opportunity for British businesses

The Climate Change Committee estimates that the UK will need to invest £1.4 trillion between 2020 and 2050 to reach net zero1.  This includes an average of £50 billion per year between 2025 and 2050. 

Governments around the world are seeking solutions to similar challenges and considering how their own green transitions can be financed. But this need to invest means that there is also a unique opportunity for British businesses to innovate, produce, and supply the goods and services needed to enable the transition, not only in the UK but across the globe. 

The introduction of new products and services could spark a green ‘multiplier’ of growth for businesses and consumers. Such products and services will also drive demand and behaviour change among businesses’ customers, suppliers and partners.

Official estimates suggest that the UK’s green economy already supports 200,0002 to 400,0003 jobs. And while there is considerable uncertainty surrounding future growth, two recent studies have suggested that by 2050 the number of jobs in the green economy could grow to between 1.4 million4 and 2.5 million5, so there is significant growth potential for the UK.

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"By 2050 the number of jobs in the green economy could grow to between 1.4 million and 2.5 million, so there is significant growth potential for the UK."

The UK Green Growth Index

Success is not a given, however. For many parts of the economy the net zero transition will create challenges due to the need to adapt products, processes, and skills. And different geographical areas of the UK will face varying challenges and opportunities, reflecting differences in their industrial sectors, skills and innovation.

The UK Green Growth Index was developed by Oxford Economics and Lloyds Banking Group to explore how well placed the UK’s nations and regions are to capitalise on the opportunities of the green economy

And the opportunities are numerous; whether through industry, innovation, skills and training or renewable energy infrastructure, every area of the UK can utilise its unique strengths to take advantage of the transition. 

The UK Green Growth Index is based on a range of factors such as these to determine a ‘green growth opportunity’ score for each area of the UK. The scoring range is from zero to 100, with 0 indicating the least opportunity for green growth and 100 indicating the most opportunity. A score of 50 is equivalent to the UK average. 

Results across the UK's nations and regions

This graph and the accompanying table shows where each UK nation and region sits on the Green Growth Index:

Scatter graph showing the green growth opportunity score position of each nation and region in the UK

The UK Green Growth Index

The UK Green Growth Index

Ranking

UK nation or region

Score

1

Scotland

80.6

2

Wales

63.5

3

South West England

54.6

4

South East England

52.0

5

The Midlands

48.7

6

North of England

48.3

7

East of England

45.6

8

Yorkshire and the Humber

45.1

9

Northern Ireland

42.7

10

London

36.5

While every part of the UK has clusters of expertise in particular aspects of the green economy, the unique blend of challenges and opportunities each region faces often reflects its economic heritage. The regions that have a strong industrial history are well-placed to transition to the green economy – but this is contingent on innovation and developing relevant skills.

There is a central group of English regions that may face similar degrees of challenge and opportunity, but around this group are a number of outliers.  

Wales and Northern Ireland may experience some of the greatest disruption from the transition. However, Wales has a high score on the opportunity index, indicating there is already a firm foundation of green economy activity upon which to build, particularly within the energy sector. In contrast, for Northern Ireland there is a greater need to develop some of the factors needed to drive its green economy towards a smooth transition.

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"Lloyds Banking Group is committed to supporting regional regeneration to ensure no part of the UK is left behind by the transition."

Scotland is another outlier. Whilst this research suggests the transition could present a similar degree of challenge to many English regions, Scotland already has a strong base of green economy activity and assets from which to build and is well positioned to become one of the UK’s green growth leaders. 

The other clear outlier is London, where its service-based economy is likely to be much less impacted by the transition. While it will be more difficult to develop aspects of the green economy based on manufacturing or natural resources, it’s clear London will play a key role in financing the UK’s transition to a net zero future. 

This research shows clear signs that the UK’s green economy is starting to take shape. Every nation and region has its own story, but each has an important role to play in transitioning to a greener economy. In line with this research, Lloyds Banking Group is committed to supporting regional regeneration to ensure no part of the UK is left behind by the transition. 

Strengths and opportunities for each UK nation and region

Expand the sections below for more detail on the strengths and opportunities for each area of the UK.
 

  • Green growth opportunity score: 80.6

    • Scotland has a strong base of 21,000 existing green economy jobs in sectors such as onshore and offshore wind and hydroelectric power.
    • Based on the size of its labour market, Scotland has the highest concentration of green jobs in the UK.
    • Scotland also benefits from the largest cohort of higher education students in green-related subjects such as engineering and technology, building and planning, and agriculture.
    • The nation also has a well-developed base of renewable energy infrastructure.
  • Green growth opportunity score: 63.5

    • Green economy jobs support a larger proportion of total employment in Wales than the UK average, with the Welsh workforce accounting for almost 5% of UK green economy jobs.
    • Relative to its population, Wales has some of the largest amounts of renewable generating capacity in the UK.
    • A particular specialism is onshore wind energy, of which Wales has more capacity than any other part of the UK except Scotland.
    • The automotive industry is another important employer, accounting for almost 2% of Welsh GVA (Gross Value Added) and employing 11,000 people in 2019.
  • Green growth opportunity score: 54.6

    • The South West leads the UK in terms of the take up of renewable energy installations among households and businesses.
    • Some 4.8% of households have renewable energy installations, compared to the UK average of 3.0%.
    • Along similar lines, businesses have installed 241kw of renewables capacity per 1,000 jobs, compared to the UK average of less than 100kw.
    • Greater investment in the innovation and skills needed for the net zero transition could enable the South West to further enhance its green growth prospects. 
  • Green growth opportunity score: 52.0

    • The South East has a strong base of innovation infrastructure and a skilled workforce with a high concentration of workers in science, technology, engineering and mathematics (STEM) occupations.
    • The region’s industrial mix helps to explain its highly skilled workforce: almost 39% of workers are in STEM occupations, the second highest share in the UK.
    • Research and development investment is equivalent to £770 per resident — the second highest in the UK.
    • Reducing environmental impact is an important driver of innovation for 10% of firms in the South East, the highest share in the UK.
  • Green growth opportunity score: 48.7

    • The Midlands is the UK’s main centre for vehicle manufacturing, which contributes more than 6% of the region’s GVA (Gross Value Added). 
    • The Midlands employed 61,000 workers in the vehicle manufacturing industry in 2019.
    • An estimated 8.5% of firms reported that sustainability was an important driver of their innovation.
    • The take up of renewable energy equipment among households and businesses is slightly ahead of the UK average.
  • Green growth opportunity score: 48.3

    • The North benefits from an established green economy, which already supports an estimated 14% of UK jobs in the sector.
    • Almost 8% of firms in the region cite reducing environmental impact as an important driver of innovation.
    • There is a significant vehicle manufacturing industry, which accounts for more than 2% of regional GVA (Gross Value Added) — almost double the UK average share and second only to the Midlands.
    • There are currently just 22 electric vehicle charging points per 100,000 residents (compared to a UK average of 31) and electric vehicle ownership rates in the North of England are significantly lower than in the South.
  • Green growth opportunity score: 45.6

    • The East of England is a knowledge leader for the UK, with a very strong base of innovative activity and a high share of workers with skills in science, technology, engineering and mathematics (STEM) occupations. 
    • Some 37% of workers are in STEM occupations, the third highest share in the UK.
    • It has the highest rate of investment in research and development among all UK nations and regions: more than £1,000 per resident was spent in 2018.
    • There is established base of renewable energy: nearly 4% of households have renewable installations — the third highest share among UK nations and regions.
  • Green growth opportunity score: 45.1

    • Yorkshire and the Humber has a relatively high share of renewables within its electricity generating mix. 
    • The green economy supports around 17,000 jobs in Yorkshire and the Humber, or around 8% of the UK total. 
    • Relative to its population, Yorkshire and the Humber has the third highest concentration of grid renewable energy capacity in the UK, after Scotland and Wales.
    • Around 3.4% of households have installed renewable energy equipment, slightly above the UK average of 3.0%.
  • Green growth opportunity score: 42.7

    • The green economy accounts for 5,000 jobs in Northern Ireland, which is broadly in line with the UK average and should provide a solid base for further growth.
    • Within the green economy, particular specialisms include low emissions vehicles and low carbon heat, within which Northern Ireland contributes 8% and 4% of the UK total, respectively.
    • Northern Ireland generates almost 50% of its electricity from renewable sources, mainly from onshore wind for which it is second only to Scotland in terms of installed capacity.
    • The net zero transition will require an estimated 13,000 energy-related jobs in Northern Ireland.
  • Green growth opportunity score: 36.5

    • While London contributes 25% of UK GVA (Gross Value Added), 17% of jobs and is home to 13% of the population, it accounts for just 8% of the UK’s emissions.
    • London benefits from a highly skilled workforce: 42% of workers are in science, technology, engineering and mathematics (STEM) occupations, the highest share in the UK.
    • It is estimated that London supports 12% of jobs in the UK green economy. 
    • London’s skills base is complemented by above-average levels of investment in research and development.

Download the full report to read about the regional findings in more depth. 

Download the report

 

Our role in the green economy

As one of the UK’s largest financial institutions, Lloyds Banking Group is well placed to support our customers make a fair and just transition to net zero while seizing the green growth opportunity. 

We commissioned this study to inform how we work with businesses to Help Britain Recover and seize the opportunities of a green economy: from the products we offer, to the advice and guidance we give our customers. We will also use its insights to ensure we develop the right services and skills within our own organisation.

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