Low carbon and environmental industries defy the recession: official

On the road to success: alternative fuels power the most growth in the UK green economy.

Eat your heart out, George Osborne. The UK's low carbon, environmental goods and services sector grew by 4.7% in the last year, adding £5.4 billion to the economy.

Growth is led in particular by the increasing use of alternative fuels such as biofuels, wind power, building technologies and heat pumps.

This compares to the growth rate for the UK economy as a whole in the same year of 0.7%. The Chancellor had been expecting growth of 2.3% in 2011.

In his Autumn Statement last year he famously described green policies as a "burden" and a "ridiculous cost" to British businesses. He predicted that “businesses will fail, jobs will be lost, and our country will be poorer" as a result of them.

In fact, the exact opposite appears to be the case. In 2010-11 the value of sales in the sector reached a total of £122 billion compared to £116.8 billion in the previous year.

Jobs in the sector are up 2.8% on the previous year to 939,627. The report says “This is the first really positive sign of employment growth in the sector since the recession in 2008".

The figures come in a report from the Department for Business, Innovation and Skills, which also shows that the UK comes an overall sixth in the world in the low carbon and environmental goods and services sector, and sixth in 18 of the 24 sub-sectors identified. It follows the US (at £645bn), China (£435bn), Japan (£205bn), India (£205bn), and Germany (£140bn).

The six sub-sectors where the UK is not sixth are: carbon finance, where it comes second in the world, alternative energy (8th); geothermal (7th), photovoltaic (7th) and wave & tidal (5th).

Growth in the sector in the UK has been consistent in the last few years: £4.8bn or 4.3% in 2008-09 and £4.7bn or 4.3% in 2007-08.

Looking at the number of companies in the sector, this is also increasing, albeit slowly. In the last year it was 51,682, up 0.1% on the previous year, but the year before that there was a drop of -1.2% and no growth the year before that, at the start of the recession. However, these companies are employing more people.

Looking more closely at the sub-sectors, the largest growth is found in alternative fuels (15%), building technologies (12%), wind (11%), alternative fuel vehicles (11%) and heat pumps (9%) (mistakenly called geothermal in the report).

The highest year-on-year increase in growth rate is for carbon finance, followed by wind, wave & tidal, carbon capture & storage and photovoltaic.

Export of UK expertise in this area is becoming increasingly valuable. At £11.8 billion and up 3.9% on the previous year, this represents 2.5% of the value of Britain's exports for that year. 58% or £6.9 billion of this total is accounted for by alternative fuels, building technologies, photovoltaic, wind and water/ waste water.

Globally, sales in 2010-11 were £3.3 trillion, an annual increase of 3.7%. Of this, low carbon sales formed 48% of the total at £1.6 trillion, compared with renewable energy at 31% or £1 trillion, and environmental goods and services at 21% or £0.7 trillion.

The countries with the fastest growth in this sector are predominantly from the developing world: the Philippines (39%), Ukraine (16%), Pakistan (15%), the Czech Republic (13%), Saudi Arabia (13%), Turkey (13%) and Brazil (12%), mostly because they are starting from a lower base.

The report says that growth projections in the sector as a whole demonstrate a steady and sustainable trajectory, with annual forecasts increasing from 3.9% to 4%. Renewable energy shows the highest level of growth at 4.5%, with environmental services lowest at 3.4%.

The sub-sectors that are forecast to have the highest global growth rates for the current year are predicted to be carbon finance at 9.2%, additional energy sources at 9.1% and wind power at 5.2%. The lowest growth rates would be for nuclear power at 2.1%.