COMMENT: Innovation – true innovation – requires a mysterious recipe, part government policy, part social imperatives, and part economic enticements. Add a bit of spice, in terms of visionary boldness tempered by farsighted pragmatism.
Rarely does this kind of transformative innovation come from incumbents. Henry Ford was not a carriage builder; he was employed as an engineer with Edison Illuminating Company. More recently, the quixotic Elon Musk was not a car company exec but a Silicon Valley dabbler, who had made some money with a city guide business and a payments platform. Indeed, of the original FTSE 100, the foremost firms in existence at the time, less than 25% are still in the index. Some 15% have gone bankrupt, split up, or were subsumed into another business.
Green innovation
The climate crisis requires disruptive innovation if we are to avoid the worst effects and also capitalise on the tremendous opportunity that is being presented to profit from a new industrial revolution – this one, green.
In this context, how does the UK government’s levelling up policy sit? Does it create the necessary and sufficient conditions for innovation?
The policy is billed as a complete system change of how government works, underpinned by 12 defining missions that government will seek to achieve by 2030 – from increasing R&D, improving transportation and deploying 5G coverage and to vaguer outcomes like improving our “pride in place”.
Notably, the white paper had an underwhelming focus on aligning net zero with levelling up. The initial press release did not mention net zero, nor is it featured explicitly in any of the 12 missions. There was no new major funding or sustainable built environment initiatives. No focus specifically on green skills. On the surface, this seems to have been a lost opportunity to redefine success and drive green innovation. Even the courts agree – following the release of the white paper, a judge ruled in a high-profile climate case in July that the government’s plan for hitting net zero was deemed unlawful because it provided insufficient detail for how the target would be met. The judge put the government in a time out, saying it naughtily breached its own obligations under the Climate Change Act.
However, what the levelling up plan did do is provide a broad set of tools that are empowering to businesses and communities. And focus on regional centres – themselves challengers to the incumbent south east and the Oxford-London-Cambridge golden triangle. Some 55 Education Investment Areas will be designated in local authorities in England and will benefit from intensive investment and support. These are in areas where school outcomes are currently weakest, 95% of which are outside London and the south east.
Three new Innovation Accelerators, major place-based centres of innovation, will be in Greater Manchester, the West Midlands and Glasgow, with significant funding flowing into each. This is very much in line with our own philosophy of a just transition to net zero.
Levelling up is more than just regional one-upmanship, but rather levelling the playing field for those who are at risk of being left behind by the “new economy”, wherever they may be. More than one in every two jobs in carbon-intensive industries are in the Midlands, the North and Scotland. Parts of the UK that need to undergo the largest transition lie outside the south east, often in some of the least well-performing areas of the UK. While the transition to net zero could be disruptive for these places, it also could be transformative.
Taking a risk
The UK can be the global leader in low carbon innovation. With its position as a world-leading centre for green finance and a hub of venture capital investment, ranking first in Europe – and lest we forget social innovation – the Social Value Act, now 10 years old, has helped solidify the UK’s global leadership. Yes, the UK is a hotbed of innovation in ESG. And a lot of this is happening in the regional centres.
Our role as real estate developers is to help accelerate this system change. Neither government nor the private sector can do it alone. We must support British innovation, even if this appears to mean taking greater risk. We are already doing this here at FORE across our supply chain, from buying low carbon steel and cement to backing UK-led proptech pioneers. And by deploying our capital in and around the markets that the government has flagged for its interventions, a mutually reinforcing symbiosis.
These transformative innovative solutions would benefit from clear and consistent government support to be successfully scaled across the UK. Government must lead, follow, or get out of the way.
The first industrial revolution began in Great Britain in the 1760s, and many of the technological innovations deployed globally were of British origin. We can – and must – lead this next green revolution, too. The UK will need to invest £1.4tn between 2020 and 2050 to reach net zero. This represents a tremendous challenge, but also one of the greatest opportunities in our lifetimes.
Basil Demeroutis is managing partner of FORE Partnership
