Growth and decarbonisation

Productivity and regional gross domestic product and regional gross value added have continued to grow over the last 20 years as the North East LEP’s economy has started to decarbonise, albeit at a slower rate than nationally. For instance, the total GVA produced by the North East economy increased by 36% percent between 2005 and 2020. Over the same time period there was a 56% decrease in C02 emissions from the North East LEP area. This meant that the GVA produced per tonne of C02 emitted in the North East LEP increased by almost £4,000.

Over the same period the North East LEP has continued to see growth in more and better jobs, although the Covid-19 pandemic has impacted the most recent data. In Jan-Dec 2020 employment in the North East LEP area was 70,700 higher than in Jan-Dec 2014. However, this had fallen back by 32,000 in the most recent release.

The trajectory of 'better' jobs, jobs in the highest three occupational categories, has been mostly similar. In the Jan-Dec 2020 period, employment in these occupations was 84,500 higher than the 2014 total. The latest total is 15,900 lower than in Jan-Dec 2020, but there was a 13,400 increase in the most recent quarter.
 

Sectors related to Net Zero are also responsible for a considerable proportion of UK foreign direct investment. In 2021/2022 there were 170 new FDI projects started in the UK in the environment, infrastructure and transportation sector, the second largest of any sector. There was also an additional 60 new projects in the renewable energy sector. In the same year these two sectors were responsible for 11,992 of the new jobs created through FDI (14% of the total new jobs created in that year).

Occupations and Net Zero

As has been highlighted by the Office for National Statistics^[1] there is currently no standardised way of defining occupations in the Net Zero sector, which means a range of different estimates are available. The ONS only publishes one experimental dataset at the regional level measuring the number of individuals in the Low Carbon and Renewable Energy Economy (LCREE). This data is collected by asking businesses to self-identify as one of 17 subsectors deemed to be part of the LCREE.

The LCREE data suggests that 7,600 individuals were employed in the LCREE in the North East region in 2020. This was 5% of the total employment in England excluding London, slightly less than the North East region’s share of the working age population (6%). The subsectors with the largest level of employment were ‘Other energy efficient products’, ‘Nuclear’ and ‘Energy efficient lighting’

An alternative definition is used by the Resolution Foundation ^[1], who have selected a range of standard occupational classification codes to create definitions for ‘Green’ and ‘Brown’ jobs. These are jobs that are likely to experince significant changes in their work during the transition to Net Zero. Green jobs were selected on the basis that they already typically perform a range of green related activities, and for instance include Civil engineers, Conservation professionals and Town planning officers. Brown jobs were chosen based on their concentration in sectors with high levels of emissions. They include air transport operatives and large goods vehicles drivers. The full lists of 'Green' and 'Brown' occupations are available in the Resolution Foundation report^[1] or from the North East LEP upon request.

These classifications do not contain jobs that may see an increase in demand because of the transition to Net Zero but are unlikely to experience a change in their tasks. They are also more narrowly related to the subset of occupations closely related to green activities; are therefore does not cover what may be required to 'green' other related industries. Both Green and Brown jobs under this classification are concentrated in construction, manufacturing and agriculture and energy^[1].

The advantage of this approach is that allows analysis of trends over time and the relative proportion of ‘better’ jobs in each of these categories. The data shows that in 2021 approximately 10% of the North East region’s workforce could be classed as working in a Green job and a further 4% as a Brown job. A much higher proportion of Green jobs were also classed as ‘better jobs’ too, meaning that they are an occupation in the top three occupational categories. 77% of Green jobs in the North East regions were classed as better jobs compared to 26% of Brown jobs.

Using the Resolution Foundation approach also allows analysis of the typical pay in Green and Brown jobs for workers in the North East region. As can be seen from the chart below, the available data shows that those employed in Green occupations are generally better renumerated in the North East region than those employed in Brown occupations. It is also clear that these are typically occupations that have seen greater jobs growth over the last 6 years although there are exceptions.

This suggests that the transition to Net Zero could be beneficial to employment in the North East, a finding reinforced by recent modelling from the Department of Business, Energy and Industrial strategy^[1]. This report aimed to model the economic outcome of the transition to Net Zero on our region. It highlighted both the scale of the challenge and a number of risks of the transition. But it confirmed that the region has distinctive opportunities in industries such as energy, transport and heat which, with support and investment, could deliver a positive economic outcome. It suggested that the journey to Net Zero could deliver a net uplift of our economy by an additional £1.9 billion (3.4% of 2020 GVA), with 27,000 new jobs being delivered by 2050 across the sectors analysed. This includes 13,500 jobs in the energy and electricity sector, which had the largest net opportunity in the North East  

Sectors and Net Zero

Defining which sectors are part of the Net Zero economy is as equally challenging as defining the relevant occupations. Again, the LCREE data is the only regional estimate available from the ONS. This suggests that the annual turnover of the LCREE in the North East region was £2.7 billion in 2020 (9% of the total turnover in England excluding London). The three largest sectors in terms of turnover were Nuclear, Low emissions vehicles and infrastructure and Other energy efficient products, and the North East region had a higher turnover per employment in the sector than all other English regions.

One alternative measure of Net Zero related firms is provided by the Data City ^[1]. The Data City uses web scraping and machine learning to identify firms in the Net Zero supply chain, which it defines as industries that are working to reduce greenhouse gas emissions^[2]. This is an innovative measure which can be used to provide an alternative perspective on the Net Zero ecosystem, to be used in addition to the other sources such as the LCREE data outlined above.

This data suggests that there are 738 firms in the Net Zero supply chain in the North East LEP area (4% of the total firms in the UK). The data also shows that each of the seven local authorities in the North East LEP has a higher concentration of firms in the Net Zero supply chain than the UK average, suggesting that North East LEP businesses are well positioned to contribute to the national drive towards Net Zero.

Examining the subsector data shows that 43% of the firms operating in the North East LEP area were firms in the Renewable Energy Planning Database or similar to these firms. This is also evident from the most common key words found on North East LEP Net Zero websites. The next two most common sectors in the North East were Renewables and Waste management and recycling. This was broadly a similar breakdown to the rest of the UK.

Relative to the rest of Great Britain the North East LEP area does have a high concentration of employment in a few sectors that are responsible for a large amount of greenhouse gas emissions per employment. Whilst not a huge employer in the region does have an above average number of workers employed in Electricity supply, which emits the highest volume of greenhouse gases per worker in Great Britain. 10% of the North East workforce is also employed in Manufacturing which also has relatively high emissions per employment. The other sectors where the North East LEP has a strong concentration of employment however, all have relatively low emissions per employment.

Skills supply

As has been noted by the Green jobs ^[1] most of the growth in jobs from the transition to Net Zero will be in sectors that are relatively high skilled. This means that ensuring a sufficient supply of skills is fundamental to a successful transition. The Resolution Foundation has also highlighted that the task profiles of Green and Brown jobs discussed above is quite different, with Green jobs containing a much higher number of non-routine activities^[2]. The number of workers who move directly between occupations with such different activity profiles is generally quite low so there is a need to support an effective transition. 

The number of workers with a least degree level qualifications in the North East LEP area is small compared to the national average (35% in 2021 compared to 43% in England). However, there are above average numbers of students graduating from North East LEP universities in STEM related fields. 7.2% of North East LEP students in 2020/21 graduated with a degree in physical sciences significantly higher that the 4.6% of HE students educated in the North East LEP area overall. STEM related subjects are generally more closely aligned to the skills requirements of Net Zero related jobs so the North East LEP is potentially well positioned to benefit from the growth in Green occupations.

Moreover, the North East LEP has a key strength in further education provision. Over 10% of further education achievements in the North East LEP area in 2020/21 were in Engineering and Manufacturing Technology, far higher than the 3% rate for England. Again these skills are closely related to those required for the transition to Net Zero.

The North East LEP is actively working with partners in the region to deliver training in the skills required to support the Net Zero transition, having recently part funded a £2.25m Green Skills bootcamp to provide technical training in Net Zero related industries^[1]. The North East LEP and North East and Yorkshire energy hub also recently published an analysis of the skills needs required to meet the Government's ambitions to decarbonise the domestic heating market in the region^[2]. The analysis highlighted specific skills gaps in installers, digital skills, and public procurement.

Decarbonising businesses 

Many businesses in the North East region are committed to reducing their environmental impact. 24% of North East business said that they had a climate change strategy in June 2022, with 15% also having a greenhouse emissions target and 10% publishing an annual sustainability report.

In terms of the specific actions taken by North East businesses 45% said that they had switched to LED bulbs, with adjusting heating and cooling systems and going paperless also amongst the most popular actions. However, the number of North East business that had assesed the impact of climate change on their business was very low, suggesting that many businesses may still be unaware of the potential impact on Net Zero on their operations.

Beyond the specific actions taken by businesses changes to working patterns due to the Covid-19 pandemic will also affect how the North East transitions to Net Zero. In particular, the most recent data highlights that visits to workplaces in the North East LEP area are still well below pre-Covid levels suggesting that many workers are still working from home at least part of the time. This may help reduce transport related emissions, but it should also be noted that homes generally have lower energy efficiency standards than office spaces.
 

Renewable electricity generation 

The proportion of electricity generated from renewable sources in the North East LEP has been steadily increasing in recent years. The total volume of renewable electricity generated in the North East LEP has increased by 87% since 2014. This is a larger percentage increase than in England excluding London over the same period.

In 2020 1,906,193 MWh of electricity was generated from renewable sources in the North East LEP. This is equivalent to 10,419 MWh per 10,000 adults, slightly lower than the rate of 13,076 MWh for England excluding London. The North East LEP was responsible for 3% of the total renewable electricity generated in England excluding London in 2020. 

In the North East LEP 58% of this electricity was generated from onshore wind, with a further 9% generated from offshore wind.