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Delivering decarbonisation and regional growth

A cohesive national strategy on net zero can invigorate all parts of the UK.

By Carl Ennis

On the south bank of the Manchester Ship Canal at the Stanlow Manufacturing Complex, development is at an advanced stage to supply industry across the region with locally-produced hydrogen. At the same time, an industrial carbon capture and pipeline system is set to send and store ten million tonnes of carbon dioxide a year – the equivalent of taking four million cars off the road – in old gas fields in the Irish Sea.

These initiatives are part of the HyNet project, which has already signed up 40 businesses to deliver the world’s first net zero industrial region. In doing so it will create an attractive hub for investment and a platform to generate thousands of jobs.

It represents a great example of how place-based investment and local technology expertise can drive regional growth. And crucially, it’s not alone. Similar projects are underway in other areas of the UK that generate the most industrial emissions.

This is a glimpse of what can be achieved when the private sector and regions work together to respond to a national policy challenge – in this case the need to decarbonise industry. Much of the success of the project depends on consistent and long-term government policy, which, in turn, gives the private sector stability and the confidence to invest.

At Siemens, we support UK industry in using new technology to tackle the challenges of decarbonisation and productivity. We continue to invest where we see market opportunities. Those recent investments include: £200m in a state-of-the-art rail manufacturing plant in Goole, East Yorkshire; a new £200m research and production facility in Bicester for the superconducting magnets used in MRI scanners; and, most recently, plans for a new £100m rail signalling factory in Wiltshire.

There have been positive policy developments in the UK recently. The introduction of permanent full expensing of capital allowances, for example, was arguably the most significant intervention to support manufacturing in decades. Likewise, we welcomed the government’s Advanced Manufacturing Plan, which included support for strategic manufacturing sectors like automotive and green industries, and further funding for the “Made Smarter” initiative to help manufacturing small and medium sized businesses (SMEs) go digital.

Yet while one can see a direction of travel, a longer-term plan is still lacking. For too long, the UK has been in a circular debate about whether we need an industrial strategy. We believe that the UK needs to make choices about the sectors and technologies where it has, or could have, a comparative advantage, and prioritise policy accordingly to help attract and make the most of regional investment.

The UK’s strengths, with our combination of skills, innovation and existing manufacturing capabilities –
often located within our regional industrial clusters – means it can carve out a competitive niche. Importantly, this type of industrial strategy is not about ”picking winners” or just using subsidies. Instead, national policymakers could set out national ambitions and an overarching framework.

One example of where this needs to happen is in decarbonising our energy system. It’s clear the future will be largely electric, and the biggest challenge and largest cost related to electricity is simply transporting it from where it is generated to where it is needed. The efficiency benefits of megaprojects meant that building a network around centrally generated power made sense in the mid-twentieth century, but the increasing effectiveness of small-scale technology is now creating real opportunities to create a decentralised web of small, regional, smart grid systems.

Put simply, these use and store locally generated and distributed green power and balance generation with demand. They can also provide flexibility into how we invest in net zero, offering more options than just big-ticket infrastructure, and create a network of projects across the UK that generate pockets of new, localised economic activity.

There are broader benefits too. The UK is fixated on mega projects, and yet we struggle to deliver them. We need to focus on higher volumes of smaller initiatives. Because small projects have shorter turnaround times, we’d gain knowledge far quicker, giving us the ability to analyse and take our learning forward quicker into new projects. Equally, a spate of small-scale projects could help foster local competencies in specific technologies – helping to provide regional jobs while also developing homegrown skills for the UK.

These kinds of projects would enable a “whole systems” approach to energy which could help decarbonise the UK while also providing a platform for place-based economic growth. But, in short, there needs to be a plan.

We need to drive growth nationally via a strategy that plays regions to their strengths. The trick is to match that aim with national policy priorities, such as net zero, and to set out a long-term plan to achieve them. If we can do that it will give the private sector the confidence to invest and, ultimately, revitalise our regions.

We’ll be bringing leaders together from across industry to discuss and explore this and other topics at “Transform”, our free event taking place in Manchester on 17-18 July.

This article first appeared in a Spotlight print report on Economic Growth, published on 3 May 2024. Read it in full here.

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