Why geography might be the answer to economic growth.

 I reflect on Great British Energy's first year and ask an honest question: what has actually changed for the places that have been on the wrong side of industrial decline for a generation? The answer is complicated, but there is a genuine reason for optimism. The coasts, the estuaries, the old industrial heartlands are, by an accident of physics and geography, exactly where the energy transition has to be built. For the first time in decades, the map of where the next economy needs to land overlaps with the map of where the last one was lost. But geography creates the opportunity; it doesn't guarantee it. I make the case for counting the social returns the system currently ignores

Transcript

Welcome And Why Change Is Hard

SPEAKER_00 0:06

Hello and welcome back to How We Build Britain. I'm Rob Gilbert. If you find this podcast useful, please subscribe wherever you get your podcasts. This is the fourth episode of this podcast. Over the past three episodes, I have tried to set out my position on the necessity of seizing the industrial benefit of the energy transition. And in doing so, I have pointed to some of the challenges this country has faced since the early 80s and some of the choices that other countries have made differently. I have been heartened by the number of people who have reached out to me as a result of airing these views. There is genuinely a sense in the responses I've had across parts of government, parts of industry, and parts of the country of ambition and of hope and of a real willingness to do things differently. I've also reflected on why change is hard. And whilst this is not a great British energy production, GBE is where I currently work. So I want to talk for a moment about what has been a defining experience for me over the past

Great British Energy One Year On

SPEAKER_00 1:10

year. Last week, GBE marked its first anniversary since the Great British Energy Act received royal assent. I think it is fair to say that the experience of those of us who have worked inside GBE over that year is an illustration of both the opportunity and some of the obstacles that you face when you genuinely try to be different in government. But it has been enormously uplifting to work alongside so many talented people from across the public and private sectors. And there is a great deal to be proud of. In a year, we have established a strategic plan, built an organization, set up two £1 billion programs, one for supply chain and one for local power, engaged with hundreds of businesses, projects and institutions, and made our first substantial investment in the Pentland Offshore Wind Farm and in ITM power. Both, in their different ways, are about putting serious industrial capability into places that have been on the wrong side of industrial decline for a generation. To some, it may look like small steps and set against the scale of the energy transition. It is true that they are, but they are also the demonstration of an organization that is getting things done and that in the years ahead will go on to do greater things. I genuinely believe that Great British Energy, alongside the other public institutions created in the United Kingdom over the past decade, represents a change in attitude and a change in approach to the question of market intervention. We are starting to act like a country that has decided to be a serious participant in its own future, and that matters. But it does not on its own change the country. And the country right now is asking for change. There is a restlessness in Britain that is a warning, but is also, if you take it seriously, an opportunity. Because it tells you that the appetite for genuine difference is there. The question is what we do with it. And I think the honest place to start is by being clear about what

What Has Not Changed In Britain

SPEAKER_00 3:20

hasn't changed. It is undeniable that the world we are living in is changing at an unprecedented pace. The paradigms of even a decade ago feel as if they belong to a different era. This is true of employment, of geopolitical rules, of global institutions, of politics, of technology, and of the media. And yet, and this is the part of any honest reflection that is hard to make peace with, despite all that change, all that opportunity, and all that threat, some of the fundamentals of this country have not changed, except to get worse. The poorest in our society are still poor. Children born in the deprived parts of the country still stand to have far lower attainment potential than their peers born in wealthier areas. By the end of secondary school, a disadvantaged pupil in England is on average around 18 months of learning behind their peers. For the most persistently disadvantaged pupils, the gap is closer to two years. The Education Policy Institute estimates that at the current rate of progress, that gap will not close in our lifetimes. A young person from the most disadvantaged fifth of the country is around half as likely to go to university as one from the most advantaged fifth. And when it comes to the more selective universities, the most advantaged pupils are four times more likely to end up there. And those parts of the country, the ones with the widest gaps, the fewest pipelines into higher education, the deepest pockets of persistent disadvantage, are overwhelmingly the same parts of the country that have been on the wrong side of industrial decline the longest. The main economic shifts we have made as a national economy have not lifted those places out of poverty. Encouraging 50% of young people to go to university didn't make those places more productive. And for many of the young people from the places I'm talking about, the rational decision at the end of school is to leave. Because the new economy is not there. That is the bit that doesn't get said plainly enough. The economic shifts we made didn't just leave certain places behind. They actively pulled their young people out towards the cities that had the jobs the new economy was producing. The places that lost their industries lost their children too. We told ourselves that this was the natural cost of a modernizing economy, that the gains in productivity, in services, in finance, in technology would compound nationally and eventually somehow find their way back. But they haven't. The financial services economy is concentrated in a square mile in London. The technology economy is concentrated in half a dozen cities. The expansion of higher education has concentrated young people in university towns and then in the same handful of metropolitan markets they had moved to study in. These are real economic gains. Britain is a wealthier country for them, but they have happened in places, and those places are not, for the most part, the places that built modern Britain in the century before. You can draw a map of where the gains of the last 40 years have landed, and you can draw a map of where the losses sit. And those two maps barely overlap. That is the country the energy transition is being asked to land in. And that is why I think at this moment, this particular set of choices we're being asked to make matter in a way I don't think we've seen for a very long time.

Why The Transition Is Different

SPEAKER_00 7:03

Here is what I think is genuinely different about the energy transition. And it's the simplest of arguments. It's geography. The financial services industry doesn't have to be in coastal Northumberland. The tech sector doesn't have to be in South Yorkshire. The universities don't have to be on the Humber. But the energy transition does have to happen there. Because that is where the wind is. That is where the deep ports are, that is where the grid has to run from, that is where the heavy industrial heritage, the welders, the fabricators, the engineering muscle already exists. And for the first time in maybe two generations, the geography of where the next economy has to be built is by physical necessity the geography of where the last economy was lost. Think about it for a moment. The Northumberland coast, the Humber Teaside, the Ferthaforth, Port Tolbert, the Mersey, the Tyne, those names should sound familiar. They're the names of the places that built modern Britain in the nineteenth and twentieth centuries, and they were largely left behind by what came after. And they are, by an accident, physics and geography and engineering, the places where the next economy has to land. This is what I mean when I say that I think this moment is genuinely different. The opportunity to root real, durable industrial work in the places that lost it isn't theoretical. It isn't a regional development policy, it's a structural feature of what the energy transition physically is and can be. If we get this right, the next forty years won't look like the last forty.

Geography Creates A Once In A Generation Chance

SPEAKER_00 8:36

But we have to be careful because geography creates opportunity. It doesn't guarantee it. You can build a wind farm off the coast and have very little of the work and very little of the value end up landing on the coastline. The foundation structures can be made in Asia and assembled at the qua side. The operations teams can be flown in, the apprenticeships can be wound down at the end of construction, and the labor can move on. All of that is possible, and all of that is in some places happening. So the work is not just to build clean energy infrastructure in left behind places. The work is to build in a way that genuinely roots the value chain in those places. It also requires the system to start counting things it currently doesn't. Julia Pike, one of the Clean Power Commissioners and previously managing director of Sizuell C, has been making this argument more clearly than anyone I have read on it. She published a piece on her Substack, One Million Futures, a couple of weeks ago that I would recommend to anyone serious about this question. The numbers she sets out are striking, and they are the best evidence I have seen of what the energy transition could actually do for the places it lands in. Every time a major infrastructure project moves someone from benefits into skilled work, the taxpayer saves something like £55,000 a year. Every time that worker lives locally, rather than being moved in from somewhere else, the project can save up to £100 a day in accommodation and transport. And on top of that, there is the tax paid on UK content, the wages spent in the local economy, the apprenticeships, the household incomes lifted, and the skills passed on. These are not abstract gains, they are the demonstrable, measurable returns that the energy transition can deliver in places that need them most. And the opportunity is real and it's quantifiable, but the system as it stands needs to do more to account for this. We need to look at the potential tax take on UK content. We need to consider the benefit bill saving from getting local people into these jobs. And the biggest social returns of the infrastructure investment need to be lifted and made visible. They are not just side benefits. But it is harder than it sounds. I take a lot of hope from the fact that we are starting to get the architecture right. The local power plan, the clean industry bonus, the energy skills passport, the clean energy jobs plan, instruments exist today that did not exist 18 months ago. But here is the thing, the past year of working inside one of these institutions has taught me. Architecture is necessary, but it's not sufficient. You can build the strategic plan, the programs, and the investments, but you can still find yourself wondering whether any of it is reaching the parts of the country that it was designed for. That is the discipline I think this next phase of work for everyone who's trying to make this real has to have. We need to be much more

The Risk Of Value Leaking Away

SPEAKER_00 11:30

deliberate about understanding the places where our policies, programs, and investments will land and how to unlock what is already there. When I started this podcast, I made the case for the industrial benefit of the energy transition as forcefully as I could, because we need to demonstrate that this has to be treated as industrial strategy. But winning an argument and delivering change are different things. So the next phase of what I'm going to try and do is to spend more time where this is actually being built. That means going to places, talking to the people who are doing the work, and asking what is hard about it? What is genuinely working and what isn't? And what do they need that they aren't getting? It means listening more than I have been, but it also means taking seriously the lives of the people in these places that we are asking to host the transition. Recognizing for a generation that those places have been treated as much a challenge as an economic opportunity. And recognizing that the energy transition will sadly fail politically, economically, and in terms of consent if we treat those places the same way again. The hope I take from the past year is real. It's been a privilege to work with extraordinary colleagues across so many different institutions and entities. And those institutions are starting to behave differently. The geography of the transition is finally the same geography as the parts of

Counting The True Social Returns

SPEAKER_00 12:55

the country that need it the most. And the appetite for change in the country itself is there. What is required now is the discipline to hold all of that together long enough that places, real places, with names and histories and futures start to feel different. The country has done harder things, and I think it can do this one too. The next phase of this show is about finding out how. This is how we build Britain. Thank you.