Transitioning the UK’s workforce to a net-zero economy

Key points: 

• The value of the UK’s low-carbon economy increased by 48% between 2015 and 2018 to stand at GBP 8.1 billion, while the UK’s net-zero energy sector is going to need at least 400,000 new employees by 2050 to achieve its climate targets.
• There will be significant opportunities in the North of England, where over 100,000 jobs may become available, and in the Midlands where 50,000 jobs are predicted. This will benefit the UK, where regional inequality is higher than any other comparable economy. 
• The UK’s offshore oil and gas industry has seen employment fall by nearly 40% from 2014 to 2018. Analysts suggest that global oil demand could have peaked in 2019 and may never recover to previous levels, while the UK’s high-cost of operations presents a real risk of stranded assets. 

Globally, oil and gas companies are facing a significant decline in exploration and production, with serious ramifications for the UK’s North Sea oil and gas industry. Recently, BP wrote down USD 17.5 billion of its assets by trimming its long-term oil and gas price forecast, and warned that it will be laying off about 15% of its workforce. 

The UK’s main oil and gas trade body, OGUK, warned on 28 April that 30,000 jobs are expected to be lost in the industry as a result of the oil price shock and the slump in demand triggered by the COVID-19 pandemic. But job losses have in fact been quicker than expected, with 4,000 jobs already lost by 15 June, and projections suggesting a quarter of all UK oil workers may lose their jobs. Peak oil demand may have been pushed forward by as much as three years due to COVID-19, according to several analysts as well as oil giants Shell and BP.

As this reality hits a UK already suffering from climbing unemployment – between March and May the number of people claiming unemployment benefits shot up by 126% – it is crucial that the government invests in long-term, sustainable industries and jobs. Channeling funds into an already declining fossil fuel industry will bring no long-term benefits for workers, the economy or the climate.

There has been a gradual increase in jobs in the UK’s low-carbon industry since 2015, while fossil fuel jobs in the UK have been consistently decreasing:

The value of the low-carbon economy increased by 48% between 2015 and 2018 to stand at GBP 8.1 billion. The increase was mainly due to a rise in acquisitions by the offshore wind sector. According to the Office for National Statistics:

• The UK’s Low Carbon and Renewable Energy Economy (LREE) employed 224,800 people in 2018 – a gradual increase of 24,000 jobs from 2015.
• The energy efficiency product sector accounted for 51% of all LREE jobs in the UK (114,400), and 36% of the turnover in 2018. The two other sectors with the highest number of jobs in 2018 were energy efficient lighting (22,400) and energy monitoring and saving (16,800). 
• The low emissions vehicles and infrastructure sector is the fourth largest employer in the sector (13,700), growing by 3,300 jobs from 2017 to 2018. 
• Offshore and onshore wind combined accounted for nearly 6% of jobs, with offshore wind seeing a 60% increase in employment from 2015 to 2018, while onshore wind saw a 38% decrease. 
• The vast majority of the UK’s low-carbon employees are in England – in 2018, 82.3% of the 224,800 jobs were in England, 10.2% in Scotland, 5.1% in Wales and 2.2% were in Northern Ireland.

Numbers employed across different low carbon sectors

Source: Data taken from the Office for National Statistics: Low carbon and renewable energy economy, UK: 2018

Employment in the UK’s offshore oil and gas industry fell by nearly 40% between 2014 and 2018.

• The number of employees in the low-carbon industry was nearly on par with the UK’s offshore oil and gas industry in 2018, which stood at 259,900 jobs and estimated at 269,100 in 2019. 
• Employment has been decreasing since 2014/2015, when the North Sea oil price fell 60% from summer 2014 to January 2015. Despite pledges to preserve jobs, the industry has not recovered its 2014 job numbers. 

Full-time equivalent employees in the UK’s LREE and offshore oil and gas sectors

Source: Data taken from the Office for National Statistics: 'Low carbon and renewable energy economy, UK: 2018' and Oil and Gas UK’s ‘Workforce report 2019’. Red dashes indicate predicted estimates. 

The number of jobs in the UK’s low-carbon industry will have to increase if the government is to meet its binding climate targets of net-zero by 2050. 

• The National Grid predicts that the UK’s energy sector will need at least 400,000 new employees in the ‘Net Zero Energy Workforce’ by 2050, an increase of over 40% from total LREE jobs in 2018. 
• Of these, 260,000 will be in completely new roles, while 140,000 will be replacing those leaving the workforce. Between 2020 and 2030, the National Grid predicts 117,000 new employees, then 152,000 between 2031 and 2040, and later 131,000 between 2041 and 2050. These new roles will be linked to new technologies, such as electric vehicles, hydrogen and carbon capture and storage. 
• Every region across the UK will require tens of thousands of new employees, with significant opportunities in the North of England where over 100,000 jobs may become available, and in the Midlands where 50,000 jobs are predicted. In Scotland, Wales and Northern Ireland, 90,000 jobs are expected to become available.
• Diversifying new jobs would benefit an unequal UK. The UK was deemed to be more regionally divided than any other comparable economy in 2019, according to the Institute for Public Policy Research. Since 2010, job creation in the UK has been overwhelmingly concentrated in London. London and the South East – home to just a quarter of the UK’s population – account for almost a third of the country’s net increase in jobs since 2010.

With the right government support, and following the scenarios laid out by the Committee on Climate Change’s (CCC) core recommendations and National Grid’s Future Energy Scenario, the UK could create 700,000 new green jobs by 2030 and a further 488,000 through to 2050, according to new research by the Local Government Association (LGA).

Geographical breakdown of jobs needed to get the UK to newt zero by 2050

Source: National Grid report Building the net zero energy workforce, 2020. 

More jobs will be created if the UK government invests in the low-carbon economy, verus oil and gas. 

• The average employment creation across all renewable energy is 0.65 jobs per GWh of energy, and the average across both renewable energy and energy efficiency is 0.80 jobs/GWh. Average job creation for fossil fuels is only 0.14 jobs per GWh (coal 0.15, gas 0.12), according to a UK Energy Research Centre report.
• Pre COVID-19, Sea Change International predicted that job creation in the clean energy industry could exceed losses in oil and gas by threefold, if progressive and green policies were pursued.  

The fossil fuel sector was already on the cusp of a structural change before the COVID-19 crisis and the UK’s North Sea oil and gas industry was already struggling. 

The UK’s Office for Budget Responsibility (OBR) projected in March 2019 that revenues from oil and gas would remain less than 0.1% of the UK’s GDP, after revenues fell by 90% from 2008-2009, when they accounted for 0.7% of GDP. 

• Since 2008-2009, the UK’s oil and gas revenues fell from GBP 10.6 billion (0.7% GDP), to GBP 1.1 billion (0.1% GDP) in 2018-2019, representing a 90% drop in revenue. The OBR also predicted that production will continue to fall over the next five years. 
• Receipts from oil and gas have underperformed in almost every year of every forecast since 2015, leading the OBR to consistently revise down its forecasts. 
• The UK has the highest operation costs per barrel of all major offshore regions. This is due to a smaller field size, a fragmented operator landscape, a more mature continental shelf, and a higher number of personnel on board per produced barrel, according to Rystad. This has happened despite the UK hitting its 2015 cost-reduction target. 
• As a result, annual investment could fall below USD 1 billion by 2024, creating stranded assets. OGUK has acknowledged that North Sea companies are vulnerable to oil price volatility, and high-cost offshore drilling will bear the brunt.

Transitions from oil and gas that benefit workers and local economies are possible and have been initiated in several geographies around the world. Below are two case studies: