What are the business opportunities in the net zero transition?

Harnessing a novel way to look at green and low carbon sectors has surfaced new economic and business opportunities

The Data City and CBI Economics have collaborated on a new research report titled Analysis of the UK Net Zero Ecosystem, which looks at the impact and activity of 16 key sectors and their role within the whole UK net zero economy.

These businesses already contribute £60bn a year to the UK economy (representing 3.3% of the total economy) and support 766,000 full-time equivalent jobs (2.8% of total employment) yet outdated official sector classifications risk hampering decarbonisation efforts by failing to provide the insight that’s needed.

Why a new approach was needed

The UK’s Standard Industrial Classification (SIC) code system, used to work out the importance of different sectors and monitor trends, has not been updated since 2007 and does not provide detailed insight into the emergence of business activity in green or low-carbon sectors. This has hampered the decarbonisation effort leaving business and government short on the insight to understand what is going on and the opportunities available.

To address this, new Real-Time Industrial Classifications have been developed which provide a snapshot of 16,000 companies within these 16 sectors, alongside unique scorecards which evaluate the transition of 374 local authority areas in eight metrics around energy, economy and emissions.

The investment opportunities for net zero

The UK’s transition to net zero greenhouse gas emissions will be a defining change over the next decade.

Venture funding into the net zero ecosystem has seen tremendous growth. In 2021, this stood at around £1.1bn and has almost doubled in size each year over the past 5 years.

Could the net zero transition help achieve Levelling Up?

Regions that successfully attract businesses in the net zero space are likely to see a rise in prosperity. Our wage analysis demonstrates a wage premium for these jobs, compared to many other sectors.

The report finds that regions currently have a similar exposure to the net zero ecosystem, broadly representing around 3% of each of the regional economies. This offsets the traditional concentration of economic activity around London and shows the potential of the transition to redistribute economic activity across the UK.

We have developed a unique net zero scorecard covering 374 local authorities which consists of eight metrics across the energy, economy, and emissions themes. The scorecard demonstrates that although the transition to net zero will redistribute activity across regions, disparities exist at the local authority level.

Our scorecard highlights the environmental advantages of many coastal areas as well as signposting more challenged local authorities. Often these challenged areas also have higher potential for businesses to engage in net zero activities and drive growth in their region.

Which sectors will be the winners?

CBI Economics modelling has also helped to pick out those sectors likely to be the biggest drivers – for jobs and growth.

Energy and construction sectors have the highest contributions – with further granular detail in the report. The report also explores the breakdown of additional sector contributions, as well as how these vary across regions.

Energy stands out as an important driver since it forms an input to nearly every product and service to power the economy, with a deeper dive of this sector covered in the report.

Where can I buy the report?

Purchase Analysis of the UK Net Zero Ecosystem: The national, regional and sector impacts of net zero

The report:

• Maps the impact and activity of 16 key sectors within the whole UK net zero economy
• Models the economic contribution of the whole UK net zero economy with national, regional, and sector breakdowns
• Analyses the redistribution of economic activity
• Introduces a unique scorecard methodology which evaluates the transition of 374 local authorities
• Evaluates the wages and labour market impacts within the whole UK net zero economy

Private Consultation

Along with your purchase of the report, CBI Economics and The Data City are delighted to offer a private consultation to talk directly with our analysts and core delivery teams.

Your 30-minute consultation includes:

• 5-minute introduction to CBI Economics and The Data City
• 15-minute presentation providing an overview of the methodology and key results
• 5-minute Q&A on the presentation and the report
• 5-minute discussion on net zero topics that affect you

For further insights into the net zero transition or other emerging sectors for your local authority, region, or business, CBI Economics, the CBI’s economic consultancy division, can develop bespoke analysis and insights for your needs.