Breathing new life into the UK economy: Reshaping and rebuilding in the wake of the COVID-19 pandemic and Brexit - Unite the union
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Breathing new life into the UK economy: Reshaping and rebuilding in the wake of the COVID-19 pandemic and Brexit Analyses of specific government-funded initiatives aimed at rebooting the UK economy.
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“At a cost of just over £46bn, Unite’s Magnificent Seven would provide employment for over 250,000 people over the next three decades and generate additional annual output of almost £120bn to 2030 and substantially more to 2050. Several thousand more jobs would be created during the construction phase of seven gigafactories, providing the country with another £7bn in collective wealth. The broadband proposal will add a further £100bn by the end of the decade. This injection of confidence into the country will pay dividends in the following three decades through the export of our skills and new knowledge in EV battery production and renewable energies.” iii
About Acuity Analysis
Acuity Analysis was formed in 2017 and is an independent research organisation, created to
serve the union movement and help rebalance power in the workplace. Unions from all
sectors call upon our expertise and worker-focused analyses to provide additional leverage in
negotiations and strengthen the influence of members in the workplace, the regions and
nationally.
We provide unions with policy papers, employment and economic modelling, regional and
industry-specific impact assessments. Our work gives unions a deeper and richer
understanding of the context for corporate decisions and the impact on workers and
communities.
Our close relationship to the movement and belief in its values are embedded in everything
we do, and our long-standing partnership sets us apart from conventional research
organisations. It means we instinctively understand the needs of our clients, and quickly
capture the fundamentals of any brief, saving time and cost.
All our research is presented in an easy-to-use format and straightforward language, requiring
no prior expertise, and our documents are designed for use by union officials, to promote and
strengthen democracy at work.
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Contents
Introduction 5
Calculating the impact of the proposals 7
Cross thematic findings 9
Domestic housing retrofit 13
Context 14
Labour supply 15
Assessment of the proposal 16
Carbon capture and storage 20
Context 21
A lost decade 22
Understanding the real costs 24
Assessment of the proposal 25
Developments in the UK 27
Automotive sector transition 28
Context 29
UK/EU Trade and Cooperation Agreement 31
Batteries and fuel cells 32
Gigafactories 32
Assessment of the proposal 35
Recommendations for government actions 36
A new scrappage scheme 37
Aircraft replacement scheme 38
Context 39
Recommendations for government actions 41
Challenges of an aircraft replacement scheme 42
Supply chain innovation fund 44
Seed funding for start ups 44
Local content requirements 44
Binding commitments from industry and government 45
Renewables: Solar, offshore wind and hydrogen 46
Context 47
Solar energy 48
Offshore wind 50
A note on hydrogen 51
1Making more use of public procurement 52
Context 53
Taxation and UK public procurement 57
Assessment of the proposal 57
Infrastructure 59
Context 61
Challenges for rail freight 62
Increasing UK competitiveness 63
Investment in the north of England 65
Need for greater investment and increased capacity 66
Recommended rail freight investments 66
Broadband 68
Impact of broadband investment 69
Skills and apprenticeships 70
Context 70
Wage premiums 71
Assessing the Levy 72
Proposal for research and training tax credits 74
Skills for Gigafactories 74
Skills for automotive 75
Skills for emergency responders and workers in EV related trades 76
Skills for renewables 76
Skills for housing retrofit programme 79
Appendices
Appendix A - options for aircraft replacement 80
Appendix B - UK aerospace supply chain charter 81
Appendix C - relative benefits of CO2 reduction initiatives 82
2List of figures
Table 1. Job creation and rough timescale of Unite’s proposals 8
Table 2. Annual funding of aerospace R&D programmes in Europe 11
Table 3. Public funding received by selected companies since 2000 11
Table 4. UK government projects to fit home with energy efficiency measures 15
Table 5. Additional economic output for individual aspects of the retrofit proposal 16
Table 6. Number of homes requiring retrofitting and overall cost 17
Table 7. Cost of retrofit using government's installation capacity 17
Table 8. Costs of each retrofit and projected employment impact 18
Table 9. Jobs supported from domestic markets by component – CCUS 25
Table 10. Changes in market share of all motor vehicles, by propulsion type 30
Table 11. Non-originating content of EU/EU and EU/Japan trade agreements 31
Table 12. Global deliveries of aircraft by Boeing and Airbus 40
Table 13. UK airline owned aircraft candidates for replacement 43
Table 14. UK airline owned aircraft candidates for RR engine replacement 43
Table 15. North of England forecast trends 2016-2050 (annual tonnes lifted) 65
Table 16. Comparison of apprenticeship models in European countries 71
Table 17. Job types and skills required for a typical Gigafactory 74
Table 18. Low Carbon Renewable Energy employment and occupational projections 76
Table 19. Highest qualification held by resident population (16+) 77
Table 20. Regional job growth for offshore wind deployment to 2032 78
Table 21. Expected employment opportunities from increased turbine numbers 78
Table 22. Aircraft upgrade options and associated CO2 reductions 80
Table 23. Potential aircraft for replacement 80
Table 24. Potential of individual CO2 reduction policies 82
Chart 1. Employment in the UK automotive supply chain 2018 29
Chart 2. Licensed cars in the UK by propulsion 29
Chart 3. Projected demand for UK produced batteries 33
Chart 4. Decreases in seat capacity, passengers and revenues for European airlines 39
Chart 5. Solar employment by segment 49
Chart 6. Share of contracts awarded to foreign companies, by value 2009-2015 54
Chart 7. Use of MEAT criteria for evaluating tenders, 2006-2016 54
Chart 8. Intermodal split of inland freight transport 2018 64
Chart 9. Level of skills expected in the UK 70
Chart 10. Levy support and apprenticeship starts by company size 72
Chart 11. Apprenticeship starts, by industry 73
Chart 12. Internal Combustion Engine and EV employment to 2040 75
Chart 13. Existing jobs requiring reskilling due to electrification of road transport 76
34
Introduction
We began this work in mid-June 2020. At that time, pubs, restaurants and non-essential shops
were reopening and children were returning to schools. It was also the period in which
workplaces, the majority of which had been empty for the previous three months, began to
reopen and restart. New legislation gave the government emergency powers to restrict the
movement of people and goods, to shut-down all public transport, including closing UK ports,
and to order the closure of all non-essential businesses. The Act even provided government the
power to postpone elections, effectively suspending democracy itself. Across Europe, entire
economies ground to a halt.
The social and economic consequences of the pandemic are of such magnitude only
government has the resources, on the scale required, to rebuild the economy. But the UK is now
confronted with a second crisis. The impact of the UK’s exit from the European Union is taking
place just as the country suffers the highest COVID-19 related death rate of anywhere in Europe;
at a time when the NHS is near breaking point; and at a time when our labour market has shed
almost one million jobs in 12 months. The impact of the COVID-19 pandemic has already
pushed our economy close to breaking point and the impact of Brexit is only just starting to bite.
Government appear to have run out of answers and we hope this document will make a useful
contribution to the economic and political debate across the labour movement and in
government. This document is the culmination of a series of detailed examinations of a number
of ambitious initiatives by Unite the union, which are firmly rooted in the notion that government
is uniquely placed to prevent economic collapse and social distress. Subject to available data,
each proposal is examined and assessed in turn and calculations are made on their impact. The
UK economy is in desperate need for initiatives such as these, which will preserve and create
thousands of jobs and generate output that will cascade through UK supply-chains to UK
households and into the high-street.
The bulk of the report sets out the rationale for each of Unite’s proposals, assesses the
feasibility of each and then provides a calculation for their potential impact. The latter is carried
out with reference to three broad headings: economic, social and environmental impacts. In the
following two pages we present two recurring and cross-thematic findings that we hope will
enrich our analyses and assist the union more widely.
Acuity Analysis, January 2021
56
Calculating the impact of the proposals
The social and economic impact of each proposal is set out in the table overleaf.
Implementing just some of the proposals would generate substantial employment and
additional economic output. The following estimates have been calculated by modelling
employment in line with anticipated additional output as a result of each policy initiative.
Although it is difficult to state with a high degree of certainty, it is possible to calculate the
employment that could be sustained through each proposal.
By adopting just seven of Unite’s proposals – for housing retrofit, CCS, automotive,
gigafactories, aircraft replacement scheme, broadband and renewable energy – the UK
government would set the country on course to prosperity and a world leader in manufacturing
and services.
At a cost of just over £46bn Unite’s Magnificent Seven would provide employment for more
than 250,000 people over the next two decades. These projects would generate additional
output of almost £120bn every year to 2030, with broadband adding another £100bn by the
end of the decade. Several thousand more jobs would be created during the construction
phase of seven gigafactories, providing the country with another £7bn in collective wealth.
This injection of confidence into the country will pay dividends in the following three decades
through the export of our skills and new knowledge in EV battery production and renewable
energies.
7Table 1: Economic and social impacts of Unite’s proposals
Jobs Cost
Employment Output Cost details
2030 £bn
Retrofit Min. 7,000 annually 7,000 £800m in wages annually plus greater household spending through energy savings. £470m per year (£4.7bn until 2030) 4.7
10,000 jobs in domestic market to 2050 1 CCUS site costs £0.8/£2.2bn.
£850m GVA (domestic) by 2040 (£1bn 2050-Vivid).
CCUS 48,000 jobs through exports by 2050 (Vivid Economics) 35,000
£2.1bn GVA through export services by 2050
Government provides £1bn 1.0
Per plant: 1,500/2,000 construction; 250/300 O&M finance
6,470 to 11,145 jobs per factory, distributed … Every £500m investment in construction
1,800 - 3,500 battery manufacturing (80:20 cell manufacturing: module & pack assembly) increases national output by £957.5m/yr.
£300m per
3,240 - 6,215 supply chain (1 direct supports 1.8 in supply chain) A typical (20GWh) factory would increase
Gigafactories TOTAL 6,470 - 11,145
68,600
national output by around £3bn.
20GWh factory 2.1
(upper end)
7 gigafactories = 35,280 - 68,600 jobs = increase jobs in EV production by 8,000 (2040). (7=£21bn; £2bn ea.construction output)
TOTAL from 7 gigafactories = 43,280 - 76,600 by 2040 (Excl. construction) = £35bn output
Chemicals sector boosted by £4.8bn a year.
Chemicals 12,096 in most optimistic scenario. 12,096
Output £7.9bn p/yr increase by 2030.
No additional cost 0.0
Aero Safeguard 102,000 existing jobs + 100,000 in supply-chain - Sector output increased by £12.5bn. £7bn for all UK aircraft. 7.0
Today 5,000 in solar; 2 jobs/£1m investment £1.2bn GVA through development, CfDs now include Solar. Government
Government ambitions (domestic, commercial & large scale)... build and installation of large-scale provides general domestic and export
Solar 32,500 0.0
Total jobs by 2030 = 32,500, split into ... PV capacity AND large-scale support as per other growing
Large scale = 5,700 and Domestic and rooftop = 26,800 generators’ energy output technologies
Today 13,500 jobs The gross value added (GVA) to the UK per GW Government makes £1bn available for
Additional jobs by 2032 30GW or 40GW (Direct installed, given 32% UK content, is currently local content promotion and creating
OSW 21,000/27,930;Indirect/induced 37,000/49,210
80,000
£1.8bn and is estimated to increase to £2.9bn by local incentives for local businesses
1.0
2032=61,500/81,795 2054 = 77,000/102,410 2030 – if 65% UK content can be achieved. to participate in growth in OSW.
2,715 through 100% in UK £1.85m of household spending for every £1m in wages to FSS maintenance workers
FSS 3,500 jobs in supply chain
6,215
£300m returned to the Treasury as tax
£1.5bn for FSS contract 1.5
Procurement Multiple proposals (see section) 1,000 - Multiple proposals (see section) 0.0
Rail freight Limited data prevents calculation, but circa.2,500 2,500 - £300m to kick-start interest from business 0.3
Automotive Safeguard more than 220,000 existing jobs across sector and beyond - - Scrappage Scheme funding 0.5
Broadband 59,100 59,100 £57.5bn in additional output by 2025 - 30.0Cross thematic findings
1. UK government needs to be much more imaginative
Throughout this research it became clear that successive UK governments have lacked the
imagination and innovation of many of the country’s European counterparts. For example,
public authorities in France and Germany establish ‘Innovation Partnerships’ that allow the
state to actively and strategically engage (politically and financially) with society, on a range
of issues such as intellectual property rights, research and development, piloting new ideas
(taking a financial stake in successful projects). UK governments have tended to be averse,
even hostile, to going beyond the state’s traditional role of an overseer, or even spectator,
preferring to tweak the status quo than risk fundamental change.
As a result of the government imposed rules throughout the current pandemic, the UK’s
Chancellor had no other option than to intervene to prevent economic collapse. However, this
is a temporary measure designed to lessen the impact of the crisis and no more. As well as
taking immediate action to resuscitate the economy, the government must tackle the
fundamental problems within the economy. But this cannot be done by traditional means and
there is an urgent need for new ideas and a degree of risk taking. Sadly, despite being given
a blank canvass, Chancellor Sunak appears to have little to offer beyond the existing financial
support packages that are intended to simply preserve the status quo. Elsewhere there are
opportunities to generate a greater return for UK taxpayers, that require relatively little effort
by government. For example, the UK government could provide training for domestic
companies seeking to compete for public procurement contracts, increasing the chances of
succeeding in the competitive bidding process. Finally, due to the length of time before
repayment is due on UK government debt, the costs of UK public borrowing are at an all-time
low.1 Government should take advantage of this and innovate to reawaken the economy by
investing for the longer-term.
2. UK government should make more use of green procurement
In the absence of new legislation,2 the UK must adhere to either the procurement rules of the
WTO or those of the EU. Both sets of rules require public authorities to publish a Call for
Tender for procurement contracts and prohibit favourable treatment for domestic firms. The
assessment process is often focused on achieving value for money (often the lowest price).
1
The period before repayment falls due on government debt is currently a minimum of 15 years, which is longer than for any G7
country and is estimated to be even longer than in any other of the 37 members of the OECD.
2
The UK government has published a green paper on the future of government procurement in which it appears to propose
limited scope to include social or environmental issues within the contract awarding process. In the meantime, it unclear if the
UK procurement is governed by the rules of the WTO or European Commission.
9Green Public Procurement was introduced by the 2014 Procurement Directive and
domestically through the Public Contracts Regulations 2015, which requires the awarding of
bids to be based on a broad set of assessment criteria. Green Procurement allows the
concept of ‘overall’ (or lifetime) costs to be included in the assessment criteria for government
contracts. In a similar way to measuring the overall costs of importing cheaper foreign steel
(see section on CCS), assessing procurement bids on their lifetime costs, rather than simply
on ‘lowest price’, would make cheaper goods manufactured elsewhere less competitive than
UK supplied products, once the environmental costs (overall costs) are included.
Prior to Brexit, the UK government appeared to be making use of such provisions,
demonstrated by the Department for Transport’s own guidance that permits the favouring of
bids with the lowest environmental impact and incorporates the concept of ‘total cost’ into its
assessment criteria. On the social aspects of procurement, the Welsh government’s Code of
Practice for Ethical Employment applies to all public sector organisations that receive public
funds. But while there are plenty of examples highlighting the potential positive impact of
including such provisions in public procurement contracts with private sector organisations,
evidence of their inclusion in practice is virtually non-existent.
3. Funding for research and development
Government support for emerging industries is nothing new. In fact, early-stage support is
pivotal for the evolution and development of technology and its transition to the mainstream.
The private sector rarely makes an appearance before a technology has legs. Without this
early-stage public support private investment, on a scale necessary to create a market, reduce
costs and drive demand, is unlikely to materialise – amply demonstrated by the UK
government’s lacklustre approach to CCUS technology.3
Notable funding sources that have been lost include loans from the European Investment
Bank (EIB), project development funds and energy research and development. Without these
funds, home-grown strengths which attract investment, particularly in the renewables and
manufacturing sectors, will not be realised. The government must urgently assess the
resources and finances required to replace funding previously provided by the European
Commission, such as Horizon2020 and European Energy Innovation Funding. The government
has stated most EU Research and Development funding will continue until 2021 or the project
completion date for existing projects. Beyond this, government needs to act quickly to avoid
a funding gap that could mean research, currently carried out in the UK, moving elsewhere.
3
Refer to the CCUS section in the report for more details.
10Table 2. Annual funding of aerospace R&D programmes in Europe 2018
Country Annual funding % of GDP
UK £1.7bn 0.075
France £3.0bn 0.13
Germany £3.5bn 0.11
As the table above shows, the UK governments record on R&D spend lags that of its major
European competitors. UK aerospace R&D spend is less than half that of Germany and only
56 per cent of that in France. As a percentage of GDP, the UK spends the least out of the three
countries and would need to spend an additional £1.3bn to be level with France and an
additional £907m to have parity with Germany, as a share of GDP.
UK companies have benefit considerably from European Commission funding. In the six years
to 2020 the Horizon2020 research programme awarded a total of €5.5bn to UK companies, a
significant amount of which went to Rolls Royce. In fact, Airbus, Bae Systems and Rolls-Royce
all benefited from this source of funding over the past two decades, as the table below shows.
Rolls-Royce has benefited the most from out of all aerospace companies in the UK, receiving
a total amount of £832m since 2003.
Table 3. Public funding received by selected companies since 2000
Amount of public funding
Rolls Royce £832,381,732
Bae Systems £21,708,612
Airbus £369,707,202
TOTAL £1,223,797,546
Without a significant increase in government spending for industry R&D, the government will
need to ensure companies contribute more. Conditions for government support in relation to
R&D could also include a commitment for companies to continue working with UK higher
education institutions to rapidly develop aircraft propulsion systems able to use a greater mix
of Sustainable Aviation Fuels and the development of battery-electric and hybrid aircrafts.
114. State aid
As a member, the UK was one of the lowest state aid spenders in the European Union.4 In
2018 the UK spent 0.38 per cent of GDP on state aid5, less than half the EU average (0.84 per
cent), placing the UK 23rd out of the EU28 for state aid spend (Germany is ranked 5th, France
16th). Of course, state aid doesn’t account for all government spend, but this trend may
provide an insight into how the government perceives its own role within the economy.
The UK’s approach to state aid is confusing and its low spend places the country at a
disadvantage. But then, in some sectors, the government appears very comfortable
committing relatively high levels of state aid spending – the government spends more money
giving the film industry tax reliefs than it does on the country’s aid to the regions.
Even when bound by EU rules, the UK failed to think strategically about its role in supporting
the economy. France protects jobs and the country’s industrial capacity by demanding
binding commitments, from companies seeking to acquire firms within strategic sectors, on
maintaining jobs. The country has created a national investment fund that it uses to purchase
parts of industry, in order to protect them from foreign takeover. A law introduced in France
in 2005 identified seven sectors that are protected from foreign takeover and, despite the
possibility of breaching EU state aid rules, no case has been brought against the country at
the ECJ at the time of writing.
The European Commission recently endorsed the Hungarian government’s state aid payment
of €46.5m to Toray, a chemical company that plans to build a Battery Separator Film plant in
the country. BSF is an important component in the production of lithium-ion batteries that
provide power to EVs. This example demonstrates that other countries are taking the green
transition seriously and investing in its future. It also shows that state aid can be a legitimate
way of promoting economic growth.
The government’s indifference to emerging technologies is hampering our economy. Far from
enabling the UK to capitalise on the opportunities from Brexit (a popular phrase among
government ministers), it is doing the exact opposite.
4
The EU ranks the UK 21st out of the EU28 for its relatively low state aid spend
5
EU State Aid Scorecard 2018 (aid by main objectives in current prices).
12Proposal #1
Domestic housing retrofit
Key points
• The government’s Green Homes Deal has been a disaster and needs overhauling.
Unite’s proposal will provide a significant boost to the economy and create
thousands of employment opportunities.
• The country’s housing stock is among the least energy efficient in Europe.
Improving household energy efficiency is a no-brainer. It will help the country
meet its net-zero targets and reduce household energy bills.
• Heating is the largest component of UK household energy use Improving
household energy efficiency has the potential to reduce the UK’s annual CO2
emissions by at least 35 per cent.
• For every £1 spent through Unite’s retrofit programme, an additional £1.67 would
be generated for the UK economy. This investment would create over 7,000 jobs,
nearly £800m as additional national output and increases in household spending
from lower energy bills.
13Context
Last August the UK government announced a new £2bn Green Homes Grant, to subsidise
specific energy efficiency measures and the Scottish government is running an incentive
scheme to encourage homeowners to install renewable heat measures. There are other
schemes running across the UK, such as Help-to-Heat and the Energy Company Obligation.
Recent analyses have highlighted the UK government’s mismanagement of its Green Homes
scheme, which is now in need of a complete overhaul. Stories in the media have very recently
emerged of a complete failure in financial management, to such an extent that installation
companies are withdrawing from the scheme.
Despite all of this, the need for government support to reduce GHG emissions from the UK’s
housing stock remains. Retrofitting homes with more energy efficient heating systems will
provide significant reductions in CO2 emissions and significantly contribute to the UK’s
climate change targets. A recent report by the Institute for Public Policy Research suggests
that the UK government will need to invest a total of £8.8bn by 2050, if it wants to “maximise
the chance of meeting net-zero targets and reducing energy bills for households”.6
According to the Committee on Climate Change, the current UK government has weakened or
removed policies that supported low-carbon measures and calls for a serious drive to retrofit
energy efficiency measures. Heating energy is by far the biggest slice of UK household energy
consumption and improving household energy efficiency has the potential to reduce the UK’s
annual CO2 emissions by at least 35 per cent. Around three quarters of UK homes have an
energy efficiency rating of D or worse, making our housing stock among the least energy
efficient in Europe. The country’s 27.2m homes are responsible for 14 per cent of the country’s
greenhouse gas emissions and heating and hot water make up 25% of total energy use.
All of the pathways proposed by the government (DECC) conclude that the amount of gas
used to heat buildings should be reduced by at least three quarters by 2050 (and perhaps by
as much as 95 per cent) in order to meet our carbon targets. But at the current replacement
rate it will take until at least 2030 for the country’s 12.5m older gas boilers to be replaced by
more efficient condensing boilers, to meet the government’s own targets.
6
All hands to the pump - a home improvement plan for England, IPPR (July 2020)
14Labour supply
A major challenge for any nationwide retrofit project is the supply of skilled labour (engineers,
installers etc). The table below shows how the current shortage of appropriately skilled
workers has hindered the progress of the government’s Energy Companies’ Obligation.
Table 4. UK government projects to fit home with energy
efficiency measures: targets vs. actual
2018 target Actual
Loft insulated 545,000 43,000
Cavity walls insulated 200,000 82,000
Solid walls insulated 90,000 18,000
Heat pumps installed > 30,000 22,000
In order to ensure a secure supply of skilled workers, it is essential that Unite’s Retrofit
programme is accompanied by significant investment in vocational training and education.
Skill shortages can only be tackled through government intervention to improve the quality
and availability of apprenticeship training courses (see skills and apprenticeships section).
While there is insufficient information about the relatively low levels of all installations across
the UK’s housing stock, this study assumes the figures for actual installations reflects current
market capacity. Our employment calculations are therefore based on these figures.
While we have not included the retrofitting of additional complementary devices in our
calculations, there are opportunities to do so. For example, around 800,000 UK homes have
no heating controls at present and so these could be added to the overall work per home,
adding even more value to the Unite proposal.
15Assessment of the proposal
We have calculated individual coefficients for an increase of ‘X’ in demand in those sectors
required for the manufacture and installation of all the policy measures included in the Unite
proposal. Using the UK national accounts and associated Leontief inverse, it is possible to
calculate the change in output as a consequence of greater demand for a product or products.
In the document, an approximate value is given for the increase in demand in the materials
used for each measure (manufacture of replacements boiler, loft insulation etc.) and this is
also used to calculate the overall impact of the proposal. Using these figures, it is possible
to provide an estimate of the sector impacts and then to provide a value for the increase in
total economic output, expressed as £m.
Each initiative generates significant output, expressed as additional demand in the supply-
chain (greater demand for labour and materials) and income (wages) generated by production
to satisfy this additional demand. The table shows additional output generated by a £10m
increase in demand for each measure.
Table 5. Additional economic output for individual
aspects of the retrofit proposal
Additional output
Policy measure
(£m)
Central heating and radiators 15.35
Water heaters 15.63
Insulation 19.15
uPVC double glazing 14.86
Heat pumps and solar panels 16.53
Installation of all of the above 16.50
If £10m was spent by the government for installing new boilers in homes across the UK, then
£15.35m in output would be generated as a result. This output would be distributed through
the economy as wages for those involved in the manufacture of the boilers and for those
engaged in their installation. In this way, government investment of £10m would create
substantial employment and income for a large number of people. Plus, it would create
additional disposable income, as a result of lower household energy bills, that will be freed up
and spent on other consumer goods, further boosting the UK economy. We calculate the
output multiplier by using the effects of the SIC codes for every economic activity required in
the retrofit proposal.
16Every £60m increase in demand as a result of this proposal would increase national output by
£100.67m, meaning that for every £1 spent by government on this proposal, an additional
£1.68 would be generated elsewhere in the economy. Overall costs for the retrofit are
provided below along with the number of homes for this proposal.
Table 6. Number of homes requiring retrofitting and overall cost
No. of homes Overall cost
Energy saving measure Unit cost
(millions) (£bn)
Boiler replacement £2,500 12 3.0
Double glazing £4,500 4.4 19.8
Insulation (loft top-up) £250 7 1.7
Cavity wall (easy) £475 1.3 0.6
Cavity wall (hard) £1,875 7.5 6.3
Internal solid wall £8,000 7.5 60.0
External solid wall £12,000 7.5 90.0
While the total costs of this proposal are significant, public funding for each measure must be
considered within the context of the UK’s historically low level of interest rates. Using the
numbers of achieved installations from the government’s ECO scheme in 2018, we can
provide the annual installation rates and costs for each measure from Unite’s retrofit proposal
and as an overall total.
Table 7. Cost of retrofit using the current installation capacity of
government Green Homes scheme
Proposed Unit cost Total (£m)
Loft insulation 43,000 £250 £10.75
Solid walls insulation 18,000 £8,000 £144.00
Cavity wall (easy)7 41,000 £475 £19.48
Cavity wall (hard) 41,000 £1,875 £76.88
Heat pumps8 22,000 £10,000 £220.00
TOTAL £471.10m
7
We have split the maximum 82,000 for cavity wall insulations 50:50 between ‘hard’ and ‘easy’
8
Heat pumps have higher up-front costs than replacement gas boilers or electric heating systems. To deliver the CCC’s 2050
forecast for 19m heat pumps by 2050, around 633,000 heat pumps need to be installed each year. This is ambitious but, in
context, this equates to only 38% of the 1.67m gas boilers sold in the UK in 2019. In London, around 120,000 heat pumps will
need to be deployed in existing buildings each year in the 2030s
17As the table above shows, for a total cost of just over £470m per year, the government could
significantly improve the energy efficiency of UK homes. It would also generate additional
household income, through lower household energy bills, freeing up money that could be
spent on consumer goods and services. This investment would create additional output of
nearly £800m per year, distributed as wages and additional national output.
Retrofitting homes with energy efficiency measures and installing low-carbon heat into new
and existing homes will require new skills and could generate more high-skilled jobs in the
construction industry. Our estimates suggest that around 12-18 jobs could be created for
every £1m invested, providing an approximate employment growth as shown in the table
below.
Table 8. Costs of each retrofit and projected employment impact
Overall cost
Energy saving measure Jobs created9
(£bns)
Boiler replacement 3.0 45,000
Double glazing 19.8 297,000
Insulation (loft top-up) 1.7 25,500
Cavity wall (easy) 0.6 9,000
Cavity wall (hard) 6.3 94,500
Internal solid wall 60.0 900,000
External solid wall 90.0 1,350,000
The job numbers represent employment opportunities throughout the duration of the project,
which would last for decades at the government’s current installation rate. However, the
figures do provide considerable evidence that Unite’s retrofit proposal would significantly
boost the UK economy. Using the government’s installation rate for ECO, an annual
investment of £470m would sustain more than 7,000 jobs for each year of the retrofit
programme.
Other research demonstrates the significant employment impact of a housing retrofit
programme. The IPPR concludes that more than 325,000 new jobs could be created by 2035
9
Average of 15 jobs per £1m spend.
18by government investment in heat networks, heat pumps and installing energy efficiency
measures alone.10
Unite’s proposal will provide a significant boost to the UK economy and create thousands of
employment opportunities throughout the UK. Our calculations show that for every £1 spent
through the retrofit programme, an additional £1.67 would be generated for the UK economy.
The union’s proposal will create over 7,000 jobs, over several years and almost £800m in
additional output, mostly in the form of wages, plus some additional tax revenue. Additional
economic value will be generated through an increase in household disposable income as a
result of lower energy bills.
10
All hands to the pump - a home improvement plan for England, IPPR (July 2020)
19Proposal #2
Carbon capture and storage
Key points
• Without CCS, the costs of global climate change targets would be 138 per cent
higher, yet UK government support is lukewarm at best and its focus on capital
costs is flawed.
• This attitude undermines the government’s own commitment to reduce CO2
emissions and holds back the much needed restructuring of the country’s heavy
industries.
• Doing nothing is not an option. CCS is expensive, but the urgency of the crisis
demands government to take the lead and drive the application of this
technology.
• Using ageing North Sea assets would lessen the environmental impact of
decommissioning. There could be additional opportunities for existing O&G
workers to retrain and transition to green employment.
20Context
The industrial combustion of certain substances, such as coal or gas, produces vast
quantities of CO2. Carbon Capture and Storage (CCS) allows the CO2 to be collected,
compressed and transported via pipeline to an underground storage site. The same
geological features of oil and gas reservoirs that locked in these fuels forms of years make
these locations ideal for CO2 storage. Although CCS remains in its development and
demonstration phase, a total of 43 large-scale projects are now operational or under
development around the world. The commercialisation and industrial scale development of
CCS is expected to accelerate as global decarbonisation efforts intensify. Carbon Capture
Use – or Utilisation - and Storage (CCUS) refers to a different technology that allows CO2,
previously produced by industry, to be reused and then converted into carbon neutral products
such as plastics. It differs from CCS in that it eliminates the need for permanent CO2 storage.
Despite plans by Equinor to utilise CCUS to produce hydrogen at-scale, the available literature
on the practical deployment of CCUS is extremely limited, so too are reliable data regarding
its development and operation. CCUS technology has the potential to transform industry and
contribute significantly to global efforts on climate change as well as provide significant
employment. However, due to the scarcity of reliable data and the lack of CCUS deployment,
this paper is unable to provide any serious analysis of the technology or its potential economic
and social impact.
The UK government has consistently failed to support and develop CCS technologies on the
grounds of cost. In fact, the government’s attitude towards CCS undermines its own
commitment to reducing CO2 emission and contradicts the basic economic principle that
investment, accompanied by increased demand and utility, tends to lower costs in the long-
run. So, using the high capital costs of CCUS as the sole justification for inaction is deeply
flawed. A more useful measure through which to evaluate the feasibility of CCS would be to
use the cost of per tonne of CO2 avoided through the use of CCS. However great the costs
for government, the costs of inaction will be greater.11 As with all emerging technologies, the
use of CCS ought to be considered as one part of a larger package of GHG reduction efforts
and the introduction of a Border Carbon Adjustment. As a result, it would be possible to define
the true cost of imports, for example, of cheap steel and for introducing CCUS on an industrial
scale.
11
IPCC calculates that, without CCUS, the costs of meeting global climate change targets will be 138 per cent higher.
21Lost decade
Analysis from the Intergovernmental Panel on Climate Change and the International Energy
Agency states that CCS is ‘urgently necessary’ and the UK’s Committee on Climate Change
considers the technology ‘a necessity, not an option’ for meeting the UK’s 2050 net zero target.
This is especially the case for major GHG emitters, such as steel and cement producers. As
with all other low-carbon power technologies, CCS is expensive and requires financial support
from the government. Instead, the last decade has been one of government fiasco: the
withdrawal of £1bn of government support in 2011, just 12 months after making the money
available, followed by a similar U-turn in 2015. Its second U-turn occurred after the
government had announced the winning projects (selected through a competitive process)
and after the successful companies and government had signed legally binding contracts.
A condition for private investors receiving government support for CCS projects has been for
them to demonstrate significant cost reductions. Given that CCS development remains at an
early stage, attaching this condition to state support would be tantamount to setting
unachievable goals – a counterintuitive demand given that these projects are actually needed
in order for the UK to assess the potential of industrial scale CCS deployment.
In any event, the government has admitted that had it gone ahead with the second
competition, the impact of its investment would have been “gradually reducing deployment
costs and a decreasing requirement for government support.”12 Government pledged £800m
in its 2020 Spring budget for at least two new CCS sites, which, according to Rishi Sunak, ‘will
create up to 6,000 high-skill, high-wage, low-carbon jobs in areas like Teesside, Humberside,
Merseyside or St Fergus in Scotland.’ However, doubts have been expressed (by KPMG
among others) over whether this sum will be sufficient to meet the government’s objectives.
Government must also weigh up the potential costs for the country of failing to tackle the GHG
output from heavy industrial emitters. The UK government’s own energy roadmaps (BIS, now
BEIS; and DECC) emphasise the importance of CCS. Without private interest, only government
has the capacity and resources to invest in expensive technologies in order to demonstrate
the potential return for private investors further down the line. The alternative is for the
government to remain silent and avoid participating in the most significant transformation
since the industrial revolution.
12
National Audit Office: Carbon capture and storage: the second competition for government support, 2017.
22The UK currently exports its significant experience and knowledge in engineering,
procurement, construction, and project management. In addition, the country’s engineering
capabilities and vast experience in oil and gas are a good match for CCS. All of this knowledge
and experience provide the UK with a significant competitive advantage in future domestic,
and overseas, CCS deployment.
The UK’s geology makes it particularly suited to CCS development. The country’s abundance
of oil and gas reservoirs that are approaching end of life provides a high number of potential
storage sites. Other potential sites identified are close to the coast and in close proximity to
a number of industrial clusters – in the east and north-west of England. The possibilities of
reusing the North Sea’s existing pipeline infrastructure should be explored further (beyond
Acorn, see below) and converting end of life oil and gas assets into injection sites. Not only
does this approach make use of existing and redundant oil and gas infrastructure, it also
reduces the £10bn of decommissioning costs the government offered to partly fund. Using
old North Sea assets would also lessen the environmental impact of decommissioning on sea
life. There could be additional opportunities for existing oil and gas workers to retrain and
transition to green employment.
23Understanding the real costs
Officially the government says it recognises the importance of CCS but considers the
technology too expensive. But so are all emerging transformative technologies and nuclear
power generation and renewable energies have all followed a similar journey through
development to large scale application.
The absence of CCS will jeopardise the UK’s obligations for reducing GHG emissions and,
according to the Intergovernmental Panel on Climate Change, the global costs of achieving
climate change goals will be 138 per cent more expensive without CCS.13 An IPPC and IEA
analysis states that ‘considering the urgency of the climate crisis, cost should not be a deterrent
to investing in CCS nor dictate sequencing off the deployment of decarbonisation options.
Instead, deployment will lead to cost reductions.’ The development of UK sites will generate
significant benefits for the economy, starting with planning and manufacture, right through to
the operation and maintenance stages. The importance of CCS and its centrality to the
country meeting its targets for CO2 reductions render traditional calculations on costs
meaningless. All alternatives to ‘business as usual’ have higher costs. The most pressing
task for government is to develop a wider narrative on ‘overall costs’ and to direct the debate
away from a purely business oriented, transactional approach. A more useful cost/benefit
analysis of the technology can be made by using cost per tonne of CO2 emissions avoided.
The UK government’s deeply flawed attitude to both industry and the environment are
concerning. As an example, significant quantities of GHGs are released into the atmosphere
during the production of steel and by tolerating steel imports, our government undermines
domestic industry and reveals an ignorance of the environmental implications. The UK’s
strategy for CCS development must consider the entire supply chain of industry. Whilst it may
help the UK achieve its emissions targets to import rather than produce steel, domestic steel
production emits 150 tonnes of CO2 less than that from elsewhere in Europe and 560 tonnes
less than steel produced in China (per 1,000 tonnes of steel).
13
IPCC Climate Change 2014 Synthesis Report
24Assessment of the proposal
In addition to creating employment opportunities, CCS is able to support existing employment
in heavy GHG emitting production industries such as refining, steel, cement, ceramics and
glass. A number of reports have recommended that CCS operations are built in clusters to
reduce the costs and encourage knowledge transfer between operators and supply-chain
companies. Five UK regions have already been identified as being especially well suited to a
cluster arrangement: Teesside, Yorkshire & the Humber, the North West, Scotland and South
Wales. These regions have power and industrial facilities closely located and access to large
offshore CO2 storage capacity on the east and west coasts.
CCS creates new jobs during the construction and the operation of new facilities, as well as
in the supply chain. For example, globally the IEA expects 2,000 CCS facilities to be operating
by 2050, requiring a construction rate of 70 to 100 per year. The IEA’s figures would require
between 70,000 to 100,000 construction workers, plus around 40,000 more to operate these
facilities and the operation of the transport and storage networks required would provide
further employment. The IEA expects a further 10,000 jobs to be created by the establishment
of a centralised transport and storage industry in the North Sea.
Projections for CCS employment are shown in the table below and varies between
development stages. Job numbers will decrease over time, from an initial workforce of 1,000
to 2,500 during the construction stage to 250 or 300 workers engaged in the operation and
maintenance of the plant. In addition, employment is also anticipated as the UK CCS market
expands and the potential for exporting CCS and related services could provide further
opportunities.
Table 9: Jobs supported from domestic markets by component - CCS
Employment
Peak High point Growth period
Installation and construction 2,000 from 2035 to 2040
Operation and maintenance 1,100 from 2040 to 2050
EPCm services^ 2,250 from 2035 to 2040
MMV instruments ± 250 from 2035 to 2040
CO2 transport and storage 2,250 from 2040 to 2050
Capture and pollution control 2,250 from 2035 to 2035
^ Engineering, procurement and construction management
± Modelling, monitoring and verification
Source: Vivid Economics
25UK government figures for CCS employment is 10,000 over the next three decades. It is worth
noting that the jobs numbers required for such a roll-out of CCS installations vary at specific
points during the construction and operation and maintenance phases, as shown in the table
below. Installing a new CCS plant can take up to six years and peak employment in
construction may exceed those shown in the table above, if work on several CCS plants
overlaps. Estimates for the potential of the UK’s domestic business opportunities in CCS put
additional GVA at around £850m. There will be opportunities for UK exports, fuelled by growth
in the application of CCS and CCUS overseas. If government invests in the technology in 2021
then the UK could become a world leader over the next two decades and boost UK
employment through exporting its skills and knowledge around the world. Some estimates
put the employment potential from exports at around 40,000 to 50,000 jobs by 2050.14
Government needs to support the decarbonisation of UK’s high carbon emission industries
such as steel, ceramics and glass by introducing CCS sites on manufacturing sites around
industrial clusters. Investment will be required in the design, engineering and manufacture of
technology to support development and deployment. Without CCS, and assuming the UK is
serious about meeting its climate change targets, the country’s heavy polluters will be unable
to continue operating. The deployment of this technology is vital for the country to avoid the
dislocation and social upheaval associated with the closure of large industrial GHG emitters
in the years ahead. Finally, CCS deployment is well suited to the trade union movement’s
desire for a Just Transition. By using CCS, today’s large scale GHG emitters can continue to
exist in parallel as we transition to a greener economy. At the most convenient time for
workers, industry and government, and when large scale alternative green employment exists,
the UK can switch to lower carbon industrial production in a much more organised and co-
ordinated manner.
The UK’s ageing North Sea assets could play a significant part in the deployment of CCS and
potentially lessen the environmental impact of decommissioning. Plus, there could be
additional opportunities for existing oil and gas workers to retrain and transition to green
employment, ensuring a Just Transition, as much of the north sea’s assets reach end of life.
Finally, CCS enables GHG emitting industries, and the jobs they support, to continue. CCS
deployment could avoid the societal turmoil created by the closure of large industrial
employers, particularly in the north of England where the Conservative Party gained much
electoral support in 2019.
14
A new investment strategy: Building back a resilient and sustainable economy, Vivid Economics (June 2020)
26Developments in the UK
There are currently two major CCS projects in the UK and both are worth noting. In addition
to contributions from the private sector both projects are financially supported by the Clean
Growth project, part of the government’s Industrial Strategy Challenge Fund. They
demonstrate the willingness of industry to develop the technology for industrial scale
application. But if the overall budget of the Clean Growth fund (£170m) is a reflection of the
government’s commitments on CCS, then the outlook in the UK remains uncertain for this
technology.
Northern Endurance Alliance
A group of energy companies, led by BP, has recently announced plans to transport and store
close to 50 per cent of the UK’s total industrial carbon dioxide emissions from 2026, utilising
salt caverns under the North Sea. The carbon dioxide will be captured at sites at Teesside
and the Humber15 and then transported and stored under the sea-bed.
The Acorn project
The costs of the Acorn CCS project in St Fergus, Scotland, have been significantly reduced
over a short period of time by utilising existing oil and gas infrastructure. By repurposing
existing pipelines, the UK CCS industry has been able to make savings of around £750m. The
Acorn CO2 storage site is located 2km below the North Sea and as a result an abundance of
historic performance related data16 was available for the developers and meant the site could
be transformed within a relatively short timeframe.
Initially the project will use the St Fergus Gas Terminal to capture CO2, before expanding to
support alternative sources of CO2 in the region and into large-scale production. Because of
the links between CCS and hydrogen generation there is potential for a major hydrogen and
CS hub at St Fergus and the project also includes plans to reform natural gas into hydrogen.
Elsewhere, the port of Peterhead has potential to be transformed into an international CO2
storage hub in the North Sea and, with adequate government support and investment, experts
are expecting Acorn to be operational within the decade.
15
A partnership, headed by Norwegian state owned energy company Equinor (formerly Statoil), plans to develop two CCUS sites
(Teesside and Humber) by 2026. The CCUS site will operate alongside the world’s first at-scale facility to produce Hydrogen
from natural gas, also included in the overall plan.
16
Availability of data simplified the process for undertaking mandatory risk assessments required to ensure safe CO2 storage.
27Proposal #3
Automotive sector transition
Key points
• Without unprecedented government intervention the combined impact of social
restrictions, as a result of the COVID-19 pandemic, and the implications for trade of
the UK/EU Trade Cooperation Agreement, motor vehicle production in the UK will end.
• The resulting economic and social upheaval will destroy more than 142,000 jobs
across 2,375 companies and will crash through the entire UK economy. The £15.4bn
of wealth that the sector currently generates will be sucked out of communities
across all UK regions.
• Even if immediate government support is forthcoming, the sector still faces huge
challenges: the tightening of the Rules of Origin provisions in the UK/EU TCA from
2023 and the transition to new forms of vehicle propulsion.
• However, Unite’s proposals would not only shield the sector from these short-term
dangers, but they would provide UK automotive companies with the support and
resources necessary to stabilise existing UK activity and prepare, adapt and rebuild
the sector to overcome the challenges ahead in the coming decades.
• Our calculations reveal that seven new Gigafactories in the UK could create 22,288
jobs, with an additional 17,750 throughout the supply chain. For each £500m
invested in the construction of these Gigafactories, national output will see an
increase of £957.5m a year, supporting almost 1,000 jobs in the same period.
• The potential for the UK chemical sector is substantial and we calculate that 12,096
jobs could be created through new opportunities among chemical companies. If the
sector rises to the EV challenge then we estimate that UK output could increase by
£7.89bn a year by 2030.
28Context
There are 985 companies in the UK involved in the manufacture of motor vehicles, employing
around 85,000 people in 2018. An additional 1,220 companies are involved in the manufacture
of other parts and accessories for motor vehicles and their engines, employing 55,112 people.
A further 2,108 people are employed in the manufacture of electrical and electronic equipment
for motor vehicles and their engines. The UK automotive supply-chain is made up of a total of
2,375 companies, collectively employing over 142,000 people. In 2018, the sector contributed
£15.4bn of GVA and accounted for 8 per cent of UK manufacturing output.
Chart 1. Employment in the UK automotive supply chain 2018
90,000
80,000
Employment
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
Motor vehicles Electrical and electronic Other parts and
equipment accessories
The chart below shows the relative share of non-ICE cars on the UK’s roads today and the
evolution of alternative forms of propulsion. The number of either plug-in or battery EVs, as a
share of total UK car registrations, stood at just 2.46 per cent in 2019. This is a far cry from
the 9 per cent that the UK’s Committee on Climate Change said was required in 2020 to put
the country on track for achieving a 60 per cent share of EVs by 2030.
Chart 2. Licensed cars in the UK by propulsion
600
500
400
Hybrid electric
300
200
Plug-in hybrid electric
100 Battery electric
Gas
0 Range extended electric
2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
29Of all EVs on the UK’s roads today, 70 per cent are hybrids, a fifth are PHEVs (plug-in hybrid
EVs) and just 10 per cent are entirely battery powered (BEVs). By 2030, the Faraday Institution
expects 64 per cent of all new UK cars to be electric vehicles, rising to 95 per cent by 2040.
Intervention by governments elsewhere, for example in Norway and China, have been
instrumental to the increased take-up of electric vehicles, which ought to accelerate
development and generate further reductions in costs. In 2011 there were just five fully
electric models available in the UK. Less than seven years later the range of EVs has grown
to 46, along with an increase in geographical range – from under 100 to more than 200 miles.
It is widely anticipated that BEVs will begin to displace conventional propulsion systems in the
next 5 to 10 years.17
The changes in the UK market share of EVs and traditionally powered vehicles for the last two
years are shown below and demonstrate the rate at which demand for EVs has increased.
Table 10: Changes in market share all motor vehicles, UK 2020
Market share
2020 2019
Petrol/Diesel and MHEVs 82.7% 92.6%
Electric and alternatively fuelled * 17.5% 7.4%
* Battery electric; plug-in hybrid electric; hybrid electric vehicles
Source: SMMT vehicle data, EV & AFV registrations
If the UK government is serious in its aspiration for the country to compete globally, and,
indeed, exceed the efforts of other European states, it must understand the extent of the
support required. Notwithstanding the huge deficit created by the UK’s exclusion from the
replacement of Horizon2020, the UK government needs to provide additional public funding
sources through which the automotive sector can maintain its world class position.
But funding alone will be unable to deliver the government’s own net zero target or fulfil its
ambitions for the future of the UK economy. Government must not forget the role and
influence of the 2,735 companies that comprise the supply-chain, the vast majority of which
are small, and resource limited. The government’s capacity to engage industry, combined
with its economic purchasing power, provide significant leverage and influence for driving
change through the sector.
17
This forecast assumes that BEVs become more competitive, as measured on a total-cost-of-ownership basis.
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