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Playing to the UK’s strengths

Boris Johnson was eager to burnish his green credentials.

In early 2022, the former prime minister heaped praise on UK battery start-up BritishVolt, and the economic benefits it would bring to the north-east of England.

“Fantastic news that EV battery pioneer BritishVolt will build a Gigafactory in Northumberland, creating thousands of jobs in our industrial heartlands and boosting electric vehicle production as part of our Green Industrial Revolution,” he announced.

The UK government had committed £100 million of funding to support the development of the gigafactory, contingent on meeting certain construction milestones. Emboldened by forecasts that battery demand from EVs would outstrip supply later this decade, investors drove the valuation of the company to “unicorn” status.

Yet within the year, the business was in administration. A failure to receive orders from vehicle manufacturers, financial mismanagement and government delays conspired to bring about the downfall of the company that many believed was the UK’s answer to Tesla.

BritishVolt works in Northumberland. February 2022.

State intervention

The past 12-18 months has seen a resurgence in interventionist industrial policies among many advanced economies, including the UK’s competitors.

The main motivation for pursuing these policies, according to recent analysis by the International Monetary Fund (IMF) is strategic competitiveness.

Following this are meeting climate targets, supply chain resilience and geopolitical and national security concerns.

Interventionist policies typically include domestic subsidies, local content requirements, import or export barriers, and export and investment incentives.

As outlined previously on E-FWD, the US has employed many of these tactics to kick-start its decarbonisation via the inflation Reduction Act (IRA). It has also bolstered its economic security in semiconductor manufacturing through the CHIPS Act.

Meanwhile, the European Union and Australia have both moved forward with policies that prioritise funding for strategic technologies that help meet their climate goals, while also reducing energy and resource security risks.

Establishing a national champion is another example of an industrial strategy often employed by governments.

As the story of BritishVolt demonstrates, there are varying motivations. These include enhancing national security via increasing global competitiveness, supporting domestic jobs growth, revitalising less developed communities and even the optics that it provides politicians eager to point towards tangible economic progress – or some combination of these.

In the 1950s and 1960s, the UK and many other countries sought to create national champions around strategic industries. These included airline and car manufacturing, coal extraction and steel production.

Today, many countries are hoping to develop national champions that meet a familiar set of strategic challenges. As the world has moved on, so too has the new focus, with semiconductor chip fabrication, EV battery production and AI all capturing the planners’ imagination.


To get a sense of the type of industrial policy the UK might pursue after the general election, a speech by shadow chancellor Rachel Reeves to the Peterson Institute in Washington one year ago provides some vital clues. Her talk was the first time that the former Bank of England economist introduced the term ‘securonomics’.

She promised to rebuild “the industrial foundations that we have lost, and which has left us exposed to global shocks”. Labour, she indicated, would “make public investments in the industries that are crucial to Britain’s future success”.

In short, an industrial policy centred on ‘securonomics’ will place national security above economic efficiency.

Reflecting on the seismic change that has buffeted the security of the UK and other advanced economies in recent years, Reeves believes the pace will only quicken in the years to come. In addition to the rise of China unbalancing the global order, and the threat and opportunity posed by AI, she identified climate change as our generation’s “greatest moral and economic challenge”.

If a “green” national champion does develop in the UK, its climate credentials may not be at the front. Indeed, recent antipathy towards the pursuit of net zero means the next government must sell the multiple strategic benefits first and foremost, around energy and resource security, economic resilience, and jobs and social benefits.

First mover advantage

There’s a clear drive to seek advantage. Chris Stark, former head of the Climate Change Committee, speaking on a Bloomberg podcast, was quizzed on the UK’s shortcomings.

“It would be so much easier to have a national champion like Tesla to point to,” he said. “And if you go to Denmark, that is part of the narrative there.”

For example, Danish energy company Ørsted is now known for supplying renewable energy, but it began life as a state-owned energy business. In 2017, DONG Energy sold off its upstream oil and gas business, relaunching with a focus on power – and increasingly clean power at that.

Orsted is the national champion for Denmark, but can the UK find something similar?
Ørsted’s Avedøre plant., Denmark. Credit: Ørsted

Today, the state still owns more than half of the renewable energy company, but it has gone on to establish a global footprint focused on offshore wind.

Denmark was also one of the first countries to invest in developing wind energy generation in response to energy security worries following the 1970s oil crisis. Wind turbine manufacturer and installer Vestas also benefited from supportive government policies in Denmark. It is now the world’s biggest wind turbine manufacturer.

State led

Many of Europe’s other national green champions have their origin as state-owned energy companies.

Equinor, previously known as Statoil, was founded in 1972 by the Norwegian government to manage the country’s oil and gas reserves. The company has taken steps to go green, aiming for a 50% reduction in its operated emissions by 2030. It has also pivoted to renewables and low-carbon solutions. The state remains its largest shareholder and, like Ørsted, it also competes on the global stage operating wind power projects.

Meanwhile, France formed its nuclear power giant, Electricité de France (EDF), in the aftermath of the Second World War.

In July 2022, the French government announced it would up its stake in EDF from 84% to 100% in a bid to secure its “energy sovereignty”. As demand for low-carbon secure energy sources has increased, so has demand for EDF’s expertise elsewhere in the world.

Two consistent themes connect all four of Europe’s ‘green’ national champions. First, they are all visible signs of the country’s success, not simply domestically in achieving certain objectives, but in demonstrating it on a global scale.

Second, they exemplify first mover advantage on a global stage. All the companies were able to leverage state funding and support to shape – and then dominate – their respective industries.

A dubious track record

If UK securonomics does involve developing a green national champion, then it will inevitably be in the context of the government placing national security above economic efficiency. That should not mean that economics is disregarded completely.

History shows promoting national champions tends to result in a concentration of economic power, potentially undermining competition and innovation. It can often lead to inefficiency and a misallocation of resources as governments pick winners. It can increase the fiscal cost to the government (and ultimately the taxpayer) of meeting the objective it set out to achieve.

Such a move may also lead to a race to the bottom if other countries decide they need to embark on the same strategy. This is especially pertinent in the context of decarbonisation and national security, where a race for critical resources could push prices higher. As a result, it could make it harder for any one country to achieve its aims. Indeed, if one country decarbonises, while all others fail, the mission to avert climate change will end in disaster.

UK government officials have criticised the US’ IRA for just such an impact. “Protectionism just means investments are more difficult, costs more and slows it down,” Minister Graham Stuart said in 2023, of the IRA. “That’s not the route to go down. We have to keep trade barriers down and believe in open markets as the best solution.”

Fiscal constraints mean that the room for mistakes is limited. Here the evidence is not particularly encouraging.

The UK government’s governance and delivery mechanisms used to invest in net zero research and innovation has been found wanting. A recent report by the National Audit Office (NAO) warned that “there is a risk that the government will not achieve its carbon and economic objectives, or secure value for money”.

Comparative advantage

The lesson from past attempts to create a national champion (in the UK and elsewhere) is that governments must not ignore comparative advantage. To do otherwise is a perilous endeavour.

Comparative advantage occurs when one country can produce a good or service at a lower opportunity cost than another. In theory, countries should specialise in producing those goods where they have a lower opportunity cost as this will lead to an increase in economic welfare.

The economist David Ricardo first outlined the theory in 1817. At the time, Ricardo noted that Portugal could produce both wine and cloth with less labour than England.

However, since England was relatively better at producing cloth, it made sense to export cloth and import wine from Portugal. A country is said to have revealed comparative advantage in a product when the product’s share of that country’s exports is greater than its share of global trade.


In 2022, the Resolution Foundation published a report examining the UK’s pre-existing relative strengths in technologies, goods and services that are relevant for net zero.

Overall, the UK ranks in ninth place on green exports, accounting for 2.5% of global export volume according to the report. The UK is of course heavily specialised in services and it has a comparative advantage in areas such as green finance and related services.

However, meeting the objectives outlined by securonomics will require the UK to bolster its investment in its physical capabilities.

The report assesses the existence of a UK comparative advantage across the following key areas: zero emission passenger vehicles (ZEVs), wind (onshore and offshore), nuclear and grid flexibility, heat and buildings and carbon capture usage and storage (CCUS).

Resolution Foundation find the UK to be in a weak position, relative to other countries, to take advantage of the opportunity in EVs, grid flexibility and heat and building technologies. It cited under-developed vehicle supply chains and a lack of investment in grid and heat pump technologies as key concerns.

Play to your strengths

Nevertheless, the UK has a few industries where it can potentially exploit a comparative advantage: offshore wind, nuclear energy and CCUS. The UK has traditionally been very strong in the development of offshore wind and nuclear technology.

Hinkley. Source: EDF

However, in recent years the UK has lost its lead and missed the opportunity to become a global leader. Notably, it has fallen behind some of its European competitors.

One area where the UK has potential, according to the report, is developing its floating offshore wind industry.

In addition to delivering power to the grid, it has the potential to decarbonise offshore oil and gas operations. The UK faces a predicament though, given the shortfall in suitable port capacity.

Another opportunity is in the UK’s unique position to be a global leader in CCUS technology. Although it has been around for a long time, exploitation on a commercial scale is only at a very early stage.

The UK North Sea has one of the most favourable geologies for carbon storage with a theoretical storage capacity of 25-78 billion tonnes of CO2.

The UK could sequester CO2 from other countries short on domestic carbon storage capacity. It could also exploit its CCS stores domestically by producing – and exporting to Europe – blue hydrogen.

Meanwhile, bioenergy with CCS (BECCS) also has the benefit of providing dispatchable power generation, the only carbon removal technology to do so.

Avoiding the zero-sum game

The UK, as well as many of its European neighbours, faces the daunting challenge of simultaneously needing to enhance strategic competitiveness, reduce energy and resource security concerns, while also decarbonising.

It’s clear that all governments will have to pursue an increasingly active industrial policy if they are to achieve these objectives. But rather than compete in a zero-sum game, countries must learn to collaborate where they can.

A national green champion could be a prominent feature of future industrial policy. If it is, then the UK must play to its strengths.

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