The UK’s dynamic economic landscape boasts a range of extraordinary features, from a global financial hub to world-class science and research institutes. We maintain competitive advantages in a range of global industries, yet growth remains stagnant. Even though UK total investment as a proportion of GDP has lagged behind other G7 economies by an average of 4 percentage points since 1990[1], cleantech investment has held strong. This presents an opportunity for the UK to break from years of sluggish growth and wealth inequality. Now is the time to build on these strong foundations and unleash our true economic potential.
Our nation stands at the threshold of a transformative moment. We can generate thousands of new jobs for citizens in all regions of the UK and usher in a fresh era of prosperity and net zero industry. To achieve this ambitious objective, decisive action is required. We need to maintain our competitiveness in an ongoing cleantech race in which all major economies are competing for the lead.
We are Cleantech for UK, a coalition of company builders and investors spanning the innovation lifecycle from company formation to initial public offering (IPO) and beyond. Our mission is to engage with the government to empower UK cleantech innovators to become homegrown employers, spearheading a global clean industrial revolution. We call on political leaders across ideological lines to revitalise our country by supporting cleantech innovation at every stage: discovery, development and deployment. We outline the following three priorities to secure our cleantech industrial leadership:
Cleantech investment a bright spot in the UK market
Cleantech for UK research shows that venture capital investment into cleantech remained remarkably buoyant during 2023, receiving £2.6 billion, where other sectors saw a significant drop-off in investment. However, our data shows that later-stage funding is still scarce, meaning that UK innovators do not attract the type of funding that they need to deploy at scale meaning that the UK companies developing innovative new technologies and services do not attract the type of funding that they need to scale.
British cleantech innovators struggle to find funding for commercial-scale projects domestically. At that stage of scaling a business, innovators must typically go from raising tens of millions to hundreds of millions of pounds. As a consequence, many UK-born innovators consider scaling their businesses elsewhere, causing the UK to miss out on the associated jobs, supply chains, and tax revenues that drive prosperity. Worse yet, it’s not uncommon for companies stuck in this so-called ‘valley of death’ to fail and close due to a dearth of growth capital. To fully capitalise on our world-class R&D, these funds must be unlocked.
Public funds cannot make up the entirety of this funding gap. Thus, they must be deployed strategically to ensure that private investment leads the way. Potential avenues for government support range from first loss guarantees, off-take agreements, contracts for difference, and more. The UK needs more productive finance, and unlocking institutional investors such as pension funds for cleantech leaves policymakers with plenty of options for impact.
Cleantech strengthens our economy:
CBI Economics analysis shows that businesses involved in the net zero economy contributed £74 billion in Gross Added Value (GVA) in 2022-23, which is equivalent to 3.8% of the UK economy.
Only government can drive a step change in the business case for cleantech innovation. Thus, the next government must leverage the full suite of available fiscal and regulatory tools to send clear, predictable market signals to support the uptake of innovative clean technologies. Instilling this level of confidence in cleantech investors requires an all-party effort, free from short-term partisan manoeuvring.
Amidst economic headwinds blowing across Europe, our next government needs to craft a new fiscal framework. To underpin the cleantech transition, government must leverage the public sector balance sheet to facilitate private capital investment. This should be done in conjunction with associate institutions such as the UK Infrastructure Bank and the British Business Bank.
Policymakers also need to provide stable, long-term policy commitments such as direct technology mandates, reliable phaseout timelines and streamlined regulatory processes.
Cleantech promises well-paid gainful employment
The net zero economy currently already supports 765,700 FullTime Equivalent (FTE) jobs in the UK, and they are on average better paid than the national average salary by almost £10,000 per year (CBI Economics). That figure is set to more than double by 2050. The right investment and policy environment is key to expanding this sector and accelerating the speed of expansion.
We have the potential to emerge as a global leader in several critical cleantech sectors, from green hydrogen to carbon capture, utilisation, and storage. We have already proven our capability to lead the way, as demonstrated by our achievements in offshore wind power. The government can identify technologies poised for mass adoption and act decisively to develop a skilled workforce, thereby generating thousands of new clean industrial jobs. The government carefully consider best practices for skills development, such as the Scottish O&G retraining programme, to empower people to seek cleantech jobs. This offers a chance to safeguard the livelihoods of thousands of skilled employees in the transition.
By supporting sectors in which we enjoy competitive advantages – such as clean power, decarbonisation of buildings, sustainable fuels, long duration energy storage, carbon capture, and decarbonised manufacturing – we will bolster our international competitiveness.
Cleantech in the UK already benefits from a strong, well-established ecosystem of innovators and entrepreneurs. With the right blend of policy levers and financial mechanisms we can unleash the true potential of this technological innovation to deliver stronger growth, jobs and leadership in the UK.
Signed:
