Special report for the LSE Growth Commission, produced with the Centre for Economic Performance 

“In many parts of the country, employment in automotive manufacturing and related sectors is interwoven with local communities and their sense of identity. Well-planned policies for sustainable investment can strengthen local cohesion, generate economic opportunities and improve labour market resilience, ensuring that the benefits of the zero-carbon transition are spread” From the Foreword by Nicholas Stern

The race is on between economies to become cleaner, smarter and more efficient. For the United Kingdom to be competitive in this race, it first needs to understand where the transition to net-zero greenhouse gases brings opportunities to boost resource and labour productivity and the quality of jobs. Then it must orient policies, investment and regulation to seize these opportunities across the economy in order to stimulate sustainable and inclusive growth in the UK over the coming years.

This report sets out the principles to guide these processes. It focuses on the goods and services related to passenger vehicles, identifying the multiple areas in which the UK could be competitive: opportunities lie in diverse goods and services across value chains and stages of innovation.

The report provides a set of actionable recommendations to the UK government to drive sustainable growth in the context of passenger vehicles. Subsequent reports in the series will cover other areas of the economy.

Key findings

  • The rise of zero emission and autonomous vehicles offers a pathway to decarbonise road transport in the UK and provides growth opportunities for the country, part of the whole economy opportunity that sustainable growth presents.
  • Despite the UK losing competitiveness in comparison with market leaders, our analysis suggests it could still have a manufacturing opportunity if it steps up incentives to support production in regions across the UK, spurs demand for zero emission vehicles and secures close alignment with the European Single Market and EU emissions regulations.
  • The UK could sustain nearly 80,000 jobs in 2030 in the production of electric vehicle powertrain components, charge points, fuel cell powertrain components and autonomous vehicle hardware and software – if the UK is globally competitive in these technologies.
  • In this scenario there would be significant additional employment upstream and downstream of component production. For instance, upstream, EV component production would likely be underpinned by a competitive domestic chemicals supply chain. Downstream, car manufacturers would likely be more inclined to assemble vehicles in the UK if the country is manufacturing high value components for zero emission vehicles.
  • Related growth opportunities are diverse in nature and extend beyond the automotive supply chain as it is traditionally considered, including areas such as the testing of connected and autonomous vehicles, the production of chemical inputs for batteries, and software platforms for mobility services. Future supply chains could look very different from today’s.
  • In terms of innovation, the UK’s competitiveness varies across technologies and supply chain stages. The UK has a comparatively lower share of global innovation in clean and autonomous car technologies relative to other countries and is lagging behind on EV component innovation; there is still innovation activity in dirty car technologies.
  • However, looking at specific technologies within the clean and autonomous car category, the UK has a comparatively greater share of global innovation in connected and autonomous vehicle technologies, and regions such as the West Midlands and Eastern Scotland are hotbeds of zero emission and autonomous vehicle innovation.
  • Innovation policy can also be informed by new measures of the social returns from innovation, which include private returns on innovation as well as direct and indirect knowledge spillovers. Such measures can highlight areas where the UK returns to R&D are high.
  • To meet this diverse range of opportunities and given varying levels of competitiveness, the UK should adopt a portfolio approach to incentive design, targeting a wide range of goods and services that can contribute to zero emission, connected and autonomous road transport.
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