March 6, 2025 • 32 mins
There’s no tradeoff between net zero and growth in the UK. That’s the conventional wisdom and the position of the current government. But what if it’s the decline in available electricity that’s causing productivity, GDP and living standards to stagnate?
New research from Kallum Pickering, chief economist at Peel Hunt, suggests there may indeed be a connection. He joins Merryn Somerset Webb and senior reporter John Stepek on Merryn Talks Money to explain that the rise of power-hungry artificial intelligence and the UK’s renewed focus on defense may mean the government should reexamine its energy policies.
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Merin
Talks Money Weekly round up, our debrief on the biggest
stories in markets and economics. I'm Meren Sunset, Web Editor
(00:25):
at Large for Bloomberg UK Wealth.
Speaker 2 (00:27):
I'm Jointed Stapic what are the Money Distilled newsletter and
senior reporter for Bloomberg.
Speaker 1 (00:32):
Okay, John, there is far too much for us to
talk about this week. There's so much going on when
it comes to stories as volatile markets. There's war, there's
defense stocks, there's crypt all over the place, all this.
So what we're going to do is not talk about
any of those things. We're going to do that thing
where we just choose one major story, unpack it in
the conversation. And this week it's all about energy. The
story is about a bit of research that's come out
(00:54):
from PEELHNT Economics which asked the question, this is the
title of the research anyway, does the UK lack the
energy for productivity growth? So it's a new look at
the productivity puzzle, which you and I talk about endlessly.
What's the problem with UK productivity? Is it about having
too much cheap labor? Is it the way our welfare
(01:15):
system is set up. Is it the decline in manufacturing
as a result of Chinese growth?
Speaker 3 (01:20):
What is it?
Speaker 1 (01:20):
We talk about this all the time. This report uses
data from nearly two hundred countries to make the other
two hundred countries.
Speaker 2 (01:27):
Oh, I think the two hundred and eleven or something, but.
Speaker 1 (01:30):
Yeah, let's be precise, one hundred and eighty nine countries. Yes,
to day from one hundred and eighty nine countries to
make the argument that a miserable record of productivity over
the last twenty years or so is inextricably linked to
the country's drive to net zero. So that's two of
our favorite subjects in a oneer net zero and productivity.
(01:50):
So with us to dig into all this is the
author of this report, Calum Pickering, who is the chief
economist at Peel Hunt. Callum, welcome, thank you for joining
us today.
Speaker 3 (02:00):
Great pleasure, Thank you for having me.
Speaker 1 (02:01):
Okay, now, what I want to do is start by
asking you why you sat down to do this bit
of research, Because while it may be data driven come
as no surprise to many, it also goes against the
popular narrative and might not make you very popular. So
what made you sit down and say I'm going to
(02:22):
do this.
Speaker 3 (02:23):
Let's start with extraordinary claims require extraordinary evidence. And what
we hear from Chancellor Rachel Reeves at Ed Muliban, the
Energy Secretary, both of course Labor government but also the
previous Conservative government for many years, that there's no trade
off between economic growth and net zero. Now, as an economist,
(02:47):
that sort of gets my senses tingling a little. There's
this general rule which is there are no policy solutions,
there are only policy trade offs. Now, of course there
are exceptions, but it is a general rule. It's a
good rule of So I thought, this is quite a
big claim to make. Let me see if it's true.
And after going around the dozens of government websites where
(03:09):
all of this data is located, I've put something together,
taken a look, and actually I don't see compelling evidence
that this is true. In fact, I actually see the opposite.
I see, I think clear evidence that when we start
to aggressively pursue our net zero policy, we see almost
immediately the economic problems which we're all familiar of, slow growth,
(03:30):
weak productivity, weak growth, and living standards. They all begin.
Speaker 1 (03:36):
Interesting. And you are timing this from around two thousand
and five, right. A lot of people will look at
the UK's productivity problem, look at your chance and go, yeah,
obviously this is all about the Great Financial Crisis. It
started around then, But you're taking it back a few
years and saying, actually, it started a bit earlier.
Speaker 3 (03:53):
That's right, And we mustn't discount any of these other
factors low interest rates, what that might mean for things
like risk appetite, malinvestment. Also, we had to just pay
a price in growth terms for a while just to
fix some of the problems with the financial system that
we're exposed and of course the reason for the global
financial crisis. But what I look at is essentially one
(04:16):
hundred years of data on the UK, and what we
see is a very clear picture the available electricity to
the UK economy. That's the stuff that firms and households
can tap into to consume and produce stuff. It rises
precipitously through the twentieth century until it peaks in two
thousand and five. Since then, it's fallen by about twenty percent.
(04:41):
If I then compare productivity measure it how you like
output per work at output per hour or multi factor productivity,
which is the best productivity measure, which blends all the
factors of production. What we see is alongside that rising
trend of available electricity, productivity is nicely and then after
(05:02):
two thousand and five, around two thousand and five two
thousand and six, all of these numbers start to weaken,
and as our electricity availability declines, our productivity measures and
our GDP measures start to move sideways.
Speaker 1 (05:14):
Okay, now, let's just go back a little bit and
talk about how extraordinary it is to see a decline
in available electricity or energy of any kind, in that
this is not the first energy transition in the history
of mankind. Right. There have been several others in the past,
but every other time the new energy source has been
(05:35):
additive rather than transformative. We don't use less wood than
we used to as a globe, we don't use less
coal than we used to as a globe, we don't
use less oil, et cetera. So this is the first
time a transition has been attempted that is not additive.
In our UK electricity supply, you see the closing down
of various parts of the energy infrastructure that are then
(05:58):
not replaced.
Speaker 3 (05:59):
That's exactly where and again it's a policy choice to
reduce the available electricity to the UK economy. What we
have done is we've decommissioned what one might consider to
be dirty forms of energy coal, oil, some gas, oddly nuclear,
which is clean and it has huge potential. But as
we've decommissioned these parts of the energy output infrastructure, we
(06:23):
have not replaced them quickly enough with renewable energy, whether
that's solar, wind, and the net result has been this
decrease in energy availability. Now, one obvious pushback would be
white bulbs give out less heat, soda, machines, computers, as
the world's become more efficient, do we just not need
less energy. There's a quick check there, which is, let's
(06:46):
look at prices, how a price is behaving. That if
I know roughly what I think supply is doing, and
I can see how prices are behaving, I can make
some judgments about the demand side of this equation. And
what you see is, up until two thousand and five,
not just for electricity, but consumer energy prices across all types,
producer electricity energy prices across all types are actually fairly stable,
(07:09):
not just stable, but falling relative to general prices. And
then in two thousand and five we start to see
this steady rise which accelerates over time in prices of
all types of energy. Something, of course else happened in
the early two thousands, which is we became a net
importer of hydrocarbons, oil and gas, which has meant that
(07:31):
when prices rise now we suffer negative terms of trade
shocks instead of positive terms of trade shocks. It's bad
for our producers and bad for our consumers. And so
when you put all of this together, the staggering rise
in prices, this fall in supply. Even if you make
the case that yes, demand has probably come down a
(07:53):
little bit for any given activity demand for energy, because
we see prices rise as supply fall, we can say
with quite a bit of confidence I think that the
supply effect is larger than the demand effect.
Speaker 1 (08:06):
Okay, so one of the things that has happened is
that we have not seen our living standards rise as
a result of that. And one of the things that
you much of your report compares the UK to the US,
and we'll talk about that in a minute about whether
we should more realistically be looking at Europe. But one
of the statistics that you put in back in two
(08:27):
thousand and five, which is when our UK electricity suppliers.
You peaked, UK energy per capita was fifty percent of
the US level and our living standards were around seventy
nine percent of the US level by twenty twenty two,
and these numbers will have definitely changed since, and not
in our favor, I'm afraid. By twenty twenty two, UK
per capita energy consumption had declined to around thirty eight
percent of the US level, and per capita GDP had
(08:49):
fallen seventy four percent. I think it is a little
below that then, So you see that very clearly in
the numbers, a very different approach. They have been growing
their living standards, keeping per capita energy consumption around the same.
So using efficiency like that, we've been holding our livings
foundards at roughly the same level, possibly now falling given
the rise in population, well actually cutting our per capture.
(09:12):
That's the difference, right.
Speaker 3 (09:14):
That's exactly right. Implicitly we have made a different policy choice.
The reason where now moving on to GDP per capita
is because productivity is the thing that drives GDP per
capita over time. It's just how efficiently can you use
your factors of production? And what we should keep in
mind here is energy is a very critical factor of
production in a very fundamental sense. Productivity is capital over labor,
(09:38):
and because capital requires energy, the more energy you have,
the more productivity you can generate. I want it to
broaden this study because you get oddities if you just
look at an individual country sample. So when I look
at one hundred and eighty nine countries, the data we
go from nineteen ninety to twenty twenty two, you see
this very strong positive correlation between per capita GDP SO
(10:00):
living standards and per capita energy consumption. Rich countries consume
more energy on a per person basis. And actually, the
one thing you can say about the UK is that
almost no actually no country for its size, has a
higher standard of living for such a little amount of
energy consumption per person. When you look at the UK
(10:20):
versus the US, where you see a very big difference.
And of course I like comparing the UK to the US.
Although the UK is smaller, the makeup of its economy
is actually very similar, services and consumer oriented, has a
big financial system. It's credit driven, so you can't just
say US is just oriented towards heavy industry or something
like that. It's a very similar economy just a different scale,
(10:41):
and the point you make is exactly right. Implicitly, we
have made a very different policy choice. We have used
energy efficiency progress towards using less energy for any given
thing that we do to stabilize our living standards, but
reduce our energy consumption. What America has done is stabilized
its energy consumption but become richer over time. This is
(11:04):
implicitly a very different policy choice. And essentially this artificial
scarcity that we've imposed upon our economy, which means actually
we now have the highest energy prices in the advanced world,
we are excluding so many types of economic activity that
would just be profitable if we had lower cost of
(11:25):
energy and the energy available to produce them.
Speaker 1 (11:29):
Now, a lot of people who listen to this will
be confused because one of the things that they hear
constantly is that UK energy prices are only high because
of the gas price, and we share that problem with
the rest of Europe.
Speaker 3 (11:42):
Price is important, but what matters more here is just supply.
Let me just step back from this study and just
think about a question that we often ask ourselves in markets.
We will say the old price has gone up, or
the gas price has gone up. What does this mean
for economic activity. Actually, I can't tell you anything about
what that means for economic activity if you just tell
(12:02):
me the price. What I care about is have we
had an upside surprise in global economic activity? In other words,
has demand for this stuff gone up and therefore the
price has gone up? In which case, just be happy
that the economy is stronger. We don't need to worry
about negative effects. But if you tell me that actually
we've less supply in the world because something has happened somewhere,
We've had a geopolitical accident or the like, actually we
(12:24):
need to think about price, yes, But actually I'm asking
what can't we now do because we don't have the
gas that we did yesterday, and that's where the economic
losses actually come from. And so actually this is a
really practical question, which is, if you're a company in
the UK, you probably just cannot access the electricity that
you need. And because demand exceeds our supply potential when
(12:48):
it comes to electricity, we're rationing through prices. That's essentially
why prices are so high. So even if you strip
out all of the levees and all of these other things,
we would still have abnormally high energy prices. And the
thing that stands out is we have taken a very
different implicit choice when it comes to our energy supply.
We've reduced hours more than other countries, certainly on a
(13:08):
per person basis.
Speaker 2 (13:09):
That is staggerant. It blows my mind that our actual
available supply of energy has fallen by twenty percent over
twenty years. I'd no real idea about that. It's so
negative for growth. The point is that ultimately we need
energy abundance to do all the things we want to do,
(13:32):
and the fact is we've been rowing against that for
twenty years and that is shocking. And it's actually one
question now we'd have in the movie. Should get back
to is later. But it's like, it's more, okay, there's
policy choices, but there's also a lot of this just
seems to be people not making hard decisions at the time.
It's not an explicit policy choice. It's more or let's
put this off until someone else's problem.
Speaker 3 (13:53):
That's right. It's an implicit policy choice, which I think
gets more cover than is justified because we have somewhat
of a mantra that there's no trade off between zero
and economic growth. It's fine things have become in more
efficient energy wise, and so actually, if we just reduce
our energy capacity, it's probably not a big effect. Actually,
what you find is, in a very simple sense, you
(14:15):
have some critical factors of production that you need. You
need land, you need labor, you need capital, and you
need energy. We know where a land constrained economy, that's
we consider that when we think about growth, we're all
considering what the demographic effects of an aging and drinking
population might be for the world. Okay, capital availability is
fairly good. There's still plenty of stuff in the ground
(14:36):
we can dig out, so we're not worried about that.
But energy is just as important as these these other
three These are the three things. A couple of other
things that should just be taken out of this. I
think one is that if you look at the government's
own projections previous governments, current governments, UK electricity availability will
(14:59):
rise over time towards the middle of the century and
will exceed by a significant amount our all time peak,
which was in two thousand and five. And perhaps i'd
just give just give some rough numbers. In two thousand
and five we had around about three hundred and eighty
terra watts available to the whole economy about now, it's
(15:20):
two hundred and eighty if the government builds out renewables
and some gas, because of course you need some firm
power to account for the intermittency when the sun isn't
shina the wind doesn't blow, we'll get to four hundred
and fifty terra what hours. And the central problem is
we can decommission on time, that's we're fairly good at that,
(15:41):
but can we actually build out on time? So things
like planning, permission and regulations and all this other stuff
really really matters. And I think the reason why we
just need to take a cold, hard look at this
kind of evidence is because we faced two really difficult
choices at the moment. How do we get ahead with AI?
It has huge potential for productivity gains, but it's very
(16:04):
energy intensive in a sense, it's an industrial revolution as
much as a tech revolution. But then second, we will
need to raise our military spend as a percent of GDP.
And again, to be frank, if you want to be
a serious military power and defend yourself, you have to
be able to keep your own lights on over winter.
(16:25):
And therefore we need to have energy security and we
need to be able to meet our own needs under
any given circumstances, and so I think the worm is
probably turning on a lot of this stuff. But the
key point for me is just look at the very
basic economics. The more supply you have, the biggier economy is.
(16:46):
If you reduce that supply somewhere, you will see some
negative consequences. And we have here a very clear relationship
between our economic problems, which start before the financial crisis,
probably amplified by the financial crisis, and this precipitous for
in our electricity availability, which has been in explicit policy choice.
When we look around the world, we see evidence that
(17:08):
when economies haven't made this policy choice, like America or
South Korea or even Poland, very different things happen.
Speaker 1 (17:15):
Callums. Can go back to what you were saying about
the rise in electricity capacity by the middle of this century.
Back in two thousand and five, we're at three eighty
and you say that under the current government plans we
get four fifty. Given the rise in our population and
the demand there's going to be, that seems not very
(17:39):
much in terms of a rise from three eighty to
four to fifty. That seems like a very small amount
of electricity for a country that is attempting to use
more and more electricity in switch vehicles and all this
kind of thing, and lots of factories over to using
electricity rather than using diesel oil petrol, and an economy
that we want to really participate in the ai REV
(18:00):
that doesn't seem like anywhere near enough to me.
Speaker 3 (18:03):
It's hard to say at this stage. It's probably better
to be on the safe side and say, let's have
more energy than we'll need and see if you can
sell it to someone. We'll benefit through our trade balance
on exports, So that's quite right. What I would say is,
if you take the official population protections, what you do
see is if the government can meet its plans for
(18:25):
raising electricity availability, you will start to see an improvement
in per person energy availability, which which just came. And
so the way to think about this is we should
be gradually removing a headwind to economic growth. And one
of the things you should say is if you make
a claim like I make in what would be true
(18:46):
if I'm right, which is if the government actually builds
out and we start to see in the numbers more
and more electricity made available to the UK economy, we
probably should start to see some upside surprises to things
like per capita GDP and product And it's really as
simple as that. But of course I can't look at
a quarterly data series for the next year and say
whether this is right. This will be a five or
(19:07):
a ten year think. But what I've done is I've
started by asking the opposite, which is, if what the
government says is true, which is there's no trade off
between zero and economic growth, what would I expect to see. Well,
it would be no difference between the economic performance of
the UK, which has introduced this artificial screting on the
energy side, and other economies that haven't. And actually what
(19:31):
we do is we see very big differences.
Speaker 1 (19:34):
It seems that there's a case that you're making very
well for a slightly more pragmatic approach from the UK
towards net zero and approach say something along the lines
of Norway's, which is continued to develop oil and gas
and continue to use hydrocarbons in the same way and
not necessarily expected a fall in the use of hydrocarbons,
but it's nonetheless working towards towards the transition. At the
(19:56):
same time, so maybe there's a case for us to
be a little more pragmatic.
Speaker 3 (20:00):
Yes, I think you can probably see if you have
plans for decommissioning of hydrocarbons and nuclear whether you can
keep that online. I'm encouraged by the government's intention to
allow the build out of modul and nuclear reactors, hopefully
anywhere in the country.
Speaker 1 (20:18):
Although some rather depressing press on that earlier in the week,
suggesting that was one of the things that Rachel Waves
was planning to row back from.
Speaker 3 (20:25):
Let's see one thing I would just say here, which
is really the unfortunate point in all of this. The
UK is, on its own a big economy. We're not
a small economy by any stretch, but our carbon emissions
are less than one percent of global emissions, and global
emissions have been rising dramatically over the past twenty years.
(20:46):
We've almost half hours territorial emissions. There's a slight nuance there.
We judge our success in reducing emissions with territorial emissions,
which is what comes out of the UK economy. But
of course, if what you do is you de industrialize
in you'll our production to move elsewhere. If that production
involves lots of hydro carbon use and pollution, and then
(21:08):
you import that that doesn't count in this territorial emission.
So you have this very unfortunate situation where the UK
seems to have paid a very heavy price in terms
of economic growth, in terms of productivity, but critically living standards.
And you think about all of the political challenges that
we've faced over the last few years that are linked
to the real indignities that come from stagnant living standards,
(21:29):
without question, and the result is, because we contribute such
a small amount to global emissions, we have not changed
the dial. We have not changed the global overall emissions story.
We've just generated low economic growth, weak productivity, de industrialization
and all of this doesn't actually change the fundamental story
(21:50):
when it comes to the global carbon picture. And so
we need to ask a very serious question whether or
not this has been remains would be a sensible policy
choice for us to make.
Speaker 2 (22:03):
Yeah, And the point of it is that that's not
saying abandon. He was just saying that during the transition
period where we don't have nuclear fusion and we don't
have batteries and we still haven't built enough nuclear power stations,
we should maybe be keeping things like natural gas more
aggressively online because we still need to grow and we
(22:24):
still need to find solutions. And I suppose the other
problem is if we've get economic stagnation, then we're also
not generating any innovation, and innovation is one of the
things we need to make this actual switch to net
zero actually work.
Speaker 3 (22:38):
That's exactly right. The richest economies in the world, which
are essentially the most productive economies in the world, use
energy most efficiently, and so becoming richer is a good
and obvious way to become more energy efficient. There are
another couple of things just to throw in here, which
is that the state of the world has changed. We're
(22:59):
much more vulnerab than we once were to external geopolitical shocks,
and at present we're a net hydrocarbon importer oil and gas.
We have not huge, but significant reserves of this. We
could make a choice to say, since we're still using
this stuff, why not protect ourselves against some of these
choices by exploring some of our own supply potential. That's
(23:22):
one thing, But also keep in mind that, of course
renewables have fantastic potential. The marginal cost is extremely low.
The wind always blows, the sun we have this giant
nuclear reactor in the sky that's just giving off energy,
and this is very sensible to try and tap this stuff.
But a lot of this technology requires critical minerals which
(23:42):
we don't have in the UK. We're going to have
to import these minerals, and of course they're expensive because
everyone's trying to do this all at the same time,
Which means what we should keep in mind is even
as we transition towards majority renewables with a baseline if
something like gas resolve these intmisciency issues, we should consider
(24:05):
the fact that in this world where geo political shocks
are common, that we may still suffer these external supply shocks,
not necessarily directly through the energy that comes through trade,
but actually through some of the critical minerals and some
of the capital goods that are required to maintain and
build out this stock. So we just need to take
a cold, hard look at some of these choices.
Speaker 1 (24:27):
Yeah, this is another one of the Another one of
the conflicts that has little discussed is that we talk
about how important it is to have a shift towards
renewables for our energy security, but of course it's not
actually a secure form of energy. If we cannot continue
to have access to the wear earth metals that we
might need. So China, for example, at the moment, is
sixty percent of global rare earth mining, ninety percent of
(24:50):
the processing. But then in context, the US is only
nine percent of the mining, and in the UK I
think is an egible number. I'm not even sure we
mind anywhere else at all?
Speaker 2 (24:59):
Do We don't think so.
Speaker 1 (25:01):
So with that in mind, there is no energy security
in using only renewables or making a major shift to renewables.
Speaker 3 (25:10):
One might make it an even broader point just to
say that if you want Britain to be more secure
in future, pick the economic path that has the maximum
probability of making you as rich as possible, and that
may involve just completely throwing open the doors on some
(25:30):
of our energy because if America, China some of the
other big consumers of hydrocarbons say actually, no, we are
going to continue to use this stuff, We're going to
continue to pollute. Really, what is the use of the
UK going in the opposite direction? Given that we actually
(25:50):
can't change the circumstances in the world all that much.
That's an unfortunate policy choice to have to make it
wouldn't please me if we had to make that policy choice.
But one of the key things when it comes to
economic policy is you have to just take the world
as it is, not how you would like it to be.
And of course it would be nice just looping back
to the start if there was no trade off between
(26:12):
economic growth and net zero. But suppose that there is.
Suppose there is actually a trade off between say net
zero and military security. Suppose there's a trade off between
net zero and funding our growing pensions liabilities, military spend,
pensions liabilities. All of this requires economic growth. And if
the choice by pursuing that zero is we don't achieve
(26:34):
any economic growth or at least growth, that's not satisfactory.
We need to decide which cost we're willing to take.
And actually, the thing to point out is because our
net zero policy doesn't really influence the world picture when
it comes to carbon, the choice may actually be fairly
straightforward for us. You know, if we said, actually we
(26:56):
should pursue at zero, we should accept the lower economic growth,
and we might want to pay a choice living standards.
People choose to do that. That's absolutely fine. I'm an economist.
It's not for me to say, which I think is
the right way to go. It's just to say if
you do this will happen. That's the best I can do.
But people should be made aware that if you make
that choice, you might not actually get what you want,
which is the clean air in the limited rise in
(27:16):
the global temperature.
Speaker 1 (27:18):
There is a view that none of this matters, and
that the UK should be a global leader in the
energy transition and in the race to net zero racist
because no one else seems to be running, that we
should be a global leader regardless of what anyone else
is doing. Now, I suppose the obvious answer to that
(27:38):
is if no one's following you, are you leading? Well.
Speaker 3 (27:43):
I don't think I could put it much better than that.
The one thing that I think we should keep in
mind is that in most parts of the world, living
standards are much lower than they are in the UK,
and security is much lower. And if you want to
set the right example, a really straightforward way to do
that is to have a fast growing, dynamic economy. And
(28:03):
so when you think about global influence, typically the economies
that influence the world are the ones that have the
most dynamic economies. Because the thing that people really need
and really want and should want, is to become richer
and safer and better fit. And therefore think it will
be difficult to convince people that we're leading you down
(28:24):
a path that won't improve your LIVN standards and won't
make you safer, and won't improve your food security and
all these other things. But in the end it's the
right way to go for all these other reasons, I
don't find that very compelling. And now, of course this
is a political point, but the UK is gradually becoming
less important on the international stage. Twenty to twenty five
years ago, the UK mattered much more. We also had
(28:46):
a much stronger economy, We were a bigger share of
global GDP, we had genuinely dynamic industries. And as our
economic dynamism has weakened and other fast growing economies have
moved ahead, they have naturally taken our place, and they
shape global trends and they influence other economies more than
(29:06):
we do.
Speaker 2 (29:06):
Coming back to the other problem is if your economy
doesn't grow, then you don't innovate and you don't come
to a solution for this. I think that's because I
don't want to be able to come away from this
thinking that all right. So it's a choice between a
dirty world that's growing and a clean world that isn't.
It's the things that you If you don't have economic growth,
(29:28):
then for example, we would never have come up with AI,
and EI might require energy, but AI might also who knows,
solve nuclear fusion in the next ten years. Maybe who knows,
it's always next ten years. But the point is that
if you don't have the innovation driven by inexpensive energy
and the ability to use more and more of it,
then we're actually looking at collapse really eventually.
Speaker 3 (29:50):
Let me just make clear what I am signing the
report and what I'm not signing the report. I'm not
suggesting that we should abandon zero. That's in fact, I'm
not really making any policy recommendations at all. What I'm
doing is taking at face value what our net zero
policy has produced so far, which is a reduction in
energy availability through decommissioning of dirty forms of energy which
(30:15):
has not been offset sufficiently by renewable capacity. I have again,
this is not a policy prescription. If the quickest way
to rapidly increase the available energy to the UK economy
is through rollout of wind and solar that's probably the
policy choice to make. If it's nuclear, that's the policy
(30:36):
choice to make. If it's gas, maybe that's the policy
choice to make. It's really not to have a preference
in all of this, but I fully agree to your point.
Look to the US as the example of a country
where energy costs a low availability is extremely high. It's
the most innovative, dynamic, major economy in the world, and
(31:01):
UK tech companies startups. We're great at that, but then
they have to make a choice where can we scale.
And what you need for a company that wants to
scale is cheap, reliable energy that's not vulnerable to global gyrations.
And we can't provide that, but America can, which is
(31:21):
why companies migrate to America. During twenty twenty two, when
Europe was throttled by gas supply shortages following the Russian
invasion of Ukraine, America continued to grow. If you're a
company deciding in this unfortunately more risky world where you
might want to spend the next ten years trying to
(31:43):
grow your economy, and if you're a highly productive company
that requires lots of cheap energy, the choice is to
go to the US.
Speaker 1 (31:51):
I think that You've given everyone a lot to think
about here, and I hope that Ed Milivan will listen
to this and have a little thing. Maybe not, we'll see.
That's like, come on and discuss anyway. Callum, thank you
so much for joining us today. We really appreciate it.
Speaker 3 (32:04):
That was my great pleasure. Thank you so much.
Speaker 1 (32:08):
Thanks for listening to this week's Marin Talks Money Debrief.
If you like us, show, rate, review, and subscribe wherever
you listen to podcasts. Also be sure to follow me
and John on ex or Twitter at Mariners w and
John Underscore Steppek. This episode was produced by Sumasadi Production
Sport and sound design by Moses and
Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Merin
Talks Money Weekly round up, our debrief on the biggest
stories in markets and economics. I'm Meren Sunset, Web Editor
(00:25):
at Large for Bloomberg UK Wealth.
Speaker 2 (00:27):
I'm Jointed Stapic what are the Money Distilled newsletter and
senior reporter for Bloomberg.
Speaker 1 (00:32):
Okay, John, there is far too much for us to
talk about this week. There's so much going on when
it comes to stories as volatile markets. There's war, there's
defense stocks, there's crypt all over the place, all this.
So what we're going to do is not talk about
any of those things. We're going to do that thing
where we just choose one major story, unpack it in
the conversation. And this week it's all about energy. The
story is about a bit of research that's come out
(00:54):
from PEELHNT Economics which asked the question, this is the
title of the research anyway, does the UK lack the
energy for productivity growth? So it's a new look at
the productivity puzzle, which you and I talk about endlessly.
What's the problem with UK productivity? Is it about having
too much cheap labor? Is it the way our welfare
(01:15):
system is set up. Is it the decline in manufacturing
as a result of Chinese growth?
Speaker 3 (01:20):
What is it?
Speaker 1 (01:20):
We talk about this all the time. This report uses
data from nearly two hundred countries to make the other
two hundred countries.
Speaker 2 (01:27):
Oh, I think the two hundred and eleven or something, but.
Speaker 1 (01:30):
Yeah, let's be precise, one hundred and eighty nine countries. Yes,
to day from one hundred and eighty nine countries to
make the argument that a miserable record of productivity over
the last twenty years or so is inextricably linked to
the country's drive to net zero. So that's two of
our favorite subjects in a oneer net zero and productivity.
(01:50):
So with us to dig into all this is the
author of this report, Calum Pickering, who is the chief
economist at Peel Hunt. Callum, welcome, thank you for joining
us today.
Speaker 3 (02:00):
Great pleasure, Thank you for having me.
Speaker 1 (02:01):
Okay, now, what I want to do is start by
asking you why you sat down to do this bit
of research, Because while it may be data driven come
as no surprise to many, it also goes against the
popular narrative and might not make you very popular. So
what made you sit down and say I'm going to
(02:22):
do this.
Speaker 3 (02:23):
Let's start with extraordinary claims require extraordinary evidence. And what
we hear from Chancellor Rachel Reeves at Ed Muliban, the
Energy Secretary, both of course Labor government but also the
previous Conservative government for many years, that there's no trade
off between economic growth and net zero. Now, as an economist,
(02:47):
that sort of gets my senses tingling a little. There's
this general rule which is there are no policy solutions,
there are only policy trade offs. Now, of course there
are exceptions, but it is a general rule. It's a
good rule of So I thought, this is quite a
big claim to make. Let me see if it's true.
And after going around the dozens of government websites where
(03:09):
all of this data is located, I've put something together,
taken a look, and actually I don't see compelling evidence
that this is true. In fact, I actually see the opposite.
I see, I think clear evidence that when we start
to aggressively pursue our net zero policy, we see almost
immediately the economic problems which we're all familiar of, slow growth,
(03:30):
weak productivity, weak growth, and living standards. They all begin.
Speaker 1 (03:36):
Interesting. And you are timing this from around two thousand
and five, right. A lot of people will look at
the UK's productivity problem, look at your chance and go, yeah,
obviously this is all about the Great Financial Crisis. It
started around then, But you're taking it back a few
years and saying, actually, it started a bit earlier.
Speaker 3 (03:53):
That's right, And we mustn't discount any of these other
factors low interest rates, what that might mean for things
like risk appetite, malinvestment. Also, we had to just pay
a price in growth terms for a while just to
fix some of the problems with the financial system that
we're exposed and of course the reason for the global
financial crisis. But what I look at is essentially one
(04:16):
hundred years of data on the UK, and what we
see is a very clear picture the available electricity to
the UK economy. That's the stuff that firms and households
can tap into to consume and produce stuff. It rises
precipitously through the twentieth century until it peaks in two
thousand and five. Since then, it's fallen by about twenty percent.
(04:41):
If I then compare productivity measure it how you like
output per work at output per hour or multi factor productivity,
which is the best productivity measure, which blends all the
factors of production. What we see is alongside that rising
trend of available electricity, productivity is nicely and then after
(05:02):
two thousand and five, around two thousand and five two
thousand and six, all of these numbers start to weaken,
and as our electricity availability declines, our productivity measures and
our GDP measures start to move sideways.
Speaker 1 (05:14):
Okay, now, let's just go back a little bit and
talk about how extraordinary it is to see a decline
in available electricity or energy of any kind, in that
this is not the first energy transition in the history
of mankind. Right. There have been several others in the past,
but every other time the new energy source has been
(05:35):
additive rather than transformative. We don't use less wood than
we used to as a globe, we don't use less
coal than we used to as a globe, we don't
use less oil, et cetera. So this is the first
time a transition has been attempted that is not additive.
In our UK electricity supply, you see the closing down
of various parts of the energy infrastructure that are then
(05:58):
not replaced.
Speaker 3 (05:59):
That's exactly where and again it's a policy choice to
reduce the available electricity to the UK economy. What we
have done is we've decommissioned what one might consider to
be dirty forms of energy coal, oil, some gas, oddly nuclear,
which is clean and it has huge potential. But as
we've decommissioned these parts of the energy output infrastructure, we
(06:23):
have not replaced them quickly enough with renewable energy, whether
that's solar, wind, and the net result has been this
decrease in energy availability. Now, one obvious pushback would be
white bulbs give out less heat, soda, machines, computers, as
the world's become more efficient, do we just not need
less energy. There's a quick check there, which is, let's
(06:46):
look at prices, how a price is behaving. That if
I know roughly what I think supply is doing, and
I can see how prices are behaving, I can make
some judgments about the demand side of this equation. And
what you see is, up until two thousand and five,
not just for electricity, but consumer energy prices across all types,
producer electricity energy prices across all types are actually fairly stable,
(07:09):
not just stable, but falling relative to general prices. And
then in two thousand and five we start to see
this steady rise which accelerates over time in prices of
all types of energy. Something, of course else happened in
the early two thousands, which is we became a net
importer of hydrocarbons, oil and gas, which has meant that
(07:31):
when prices rise now we suffer negative terms of trade
shocks instead of positive terms of trade shocks. It's bad
for our producers and bad for our consumers. And so
when you put all of this together, the staggering rise
in prices, this fall in supply. Even if you make
the case that yes, demand has probably come down a
(07:53):
little bit for any given activity demand for energy, because
we see prices rise as supply fall, we can say
with quite a bit of confidence I think that the
supply effect is larger than the demand effect.
Speaker 1 (08:06):
Okay, so one of the things that has happened is
that we have not seen our living standards rise as
a result of that. And one of the things that
you much of your report compares the UK to the US,
and we'll talk about that in a minute about whether
we should more realistically be looking at Europe. But one
of the statistics that you put in back in two
(08:27):
thousand and five, which is when our UK electricity suppliers.
You peaked, UK energy per capita was fifty percent of
the US level and our living standards were around seventy
nine percent of the US level by twenty twenty two,
and these numbers will have definitely changed since, and not
in our favor, I'm afraid. By twenty twenty two, UK
per capita energy consumption had declined to around thirty eight
percent of the US level, and per capita GDP had
(08:49):
fallen seventy four percent. I think it is a little
below that then, So you see that very clearly in
the numbers, a very different approach. They have been growing
their living standards, keeping per capita energy consumption around the same.
So using efficiency like that, we've been holding our livings
foundards at roughly the same level, possibly now falling given
the rise in population, well actually cutting our per capture.
(09:12):
That's the difference, right.
Speaker 3 (09:14):
That's exactly right. Implicitly we have made a different policy choice.
The reason where now moving on to GDP per capita
is because productivity is the thing that drives GDP per
capita over time. It's just how efficiently can you use
your factors of production? And what we should keep in
mind here is energy is a very critical factor of
production in a very fundamental sense. Productivity is capital over labor,
(09:38):
and because capital requires energy, the more energy you have,
the more productivity you can generate. I want it to
broaden this study because you get oddities if you just
look at an individual country sample. So when I look
at one hundred and eighty nine countries, the data we
go from nineteen ninety to twenty twenty two, you see
this very strong positive correlation between per capita GDP SO
(10:00):
living standards and per capita energy consumption. Rich countries consume
more energy on a per person basis. And actually, the
one thing you can say about the UK is that
almost no actually no country for its size, has a
higher standard of living for such a little amount of
energy consumption per person. When you look at the UK
(10:20):
versus the US, where you see a very big difference.
And of course I like comparing the UK to the US.
Although the UK is smaller, the makeup of its economy
is actually very similar, services and consumer oriented, has a
big financial system. It's credit driven, so you can't just
say US is just oriented towards heavy industry or something
like that. It's a very similar economy just a different scale,
(10:41):
and the point you make is exactly right. Implicitly, we
have made a very different policy choice. We have used
energy efficiency progress towards using less energy for any given
thing that we do to stabilize our living standards, but
reduce our energy consumption. What America has done is stabilized
its energy consumption but become richer over time. This is
(11:04):
implicitly a very different policy choice. And essentially this artificial
scarcity that we've imposed upon our economy, which means actually
we now have the highest energy prices in the advanced world,
we are excluding so many types of economic activity that
would just be profitable if we had lower cost of
(11:25):
energy and the energy available to produce them.
Speaker 1 (11:29):
Now, a lot of people who listen to this will
be confused because one of the things that they hear
constantly is that UK energy prices are only high because
of the gas price, and we share that problem with
the rest of Europe.
Speaker 3 (11:42):
Price is important, but what matters more here is just supply.
Let me just step back from this study and just
think about a question that we often ask ourselves in markets.
We will say the old price has gone up, or
the gas price has gone up. What does this mean
for economic activity. Actually, I can't tell you anything about
what that means for economic activity if you just tell
(12:02):
me the price. What I care about is have we
had an upside surprise in global economic activity? In other words,
has demand for this stuff gone up and therefore the
price has gone up? In which case, just be happy
that the economy is stronger. We don't need to worry
about negative effects. But if you tell me that actually
we've less supply in the world because something has happened somewhere,
We've had a geopolitical accident or the like, actually we
(12:24):
need to think about price, yes, But actually I'm asking
what can't we now do because we don't have the
gas that we did yesterday, and that's where the economic
losses actually come from. And so actually this is a
really practical question, which is, if you're a company in
the UK, you probably just cannot access the electricity that
you need. And because demand exceeds our supply potential when
(12:48):
it comes to electricity, we're rationing through prices. That's essentially
why prices are so high. So even if you strip
out all of the levees and all of these other things,
we would still have abnormally high energy prices. And the
thing that stands out is we have taken a very
different implicit choice when it comes to our energy supply.
We've reduced hours more than other countries, certainly on a
(13:08):
per person basis.
Speaker 2 (13:09):
That is staggerant. It blows my mind that our actual
available supply of energy has fallen by twenty percent over
twenty years. I'd no real idea about that. It's so
negative for growth. The point is that ultimately we need
energy abundance to do all the things we want to do,
(13:32):
and the fact is we've been rowing against that for
twenty years and that is shocking. And it's actually one
question now we'd have in the movie. Should get back
to is later. But it's like, it's more, okay, there's
policy choices, but there's also a lot of this just
seems to be people not making hard decisions at the time.
It's not an explicit policy choice. It's more or let's
put this off until someone else's problem.
Speaker 3 (13:53):
That's right. It's an implicit policy choice, which I think
gets more cover than is justified because we have somewhat
of a mantra that there's no trade off between zero
and economic growth. It's fine things have become in more
efficient energy wise, and so actually, if we just reduce
our energy capacity, it's probably not a big effect. Actually,
what you find is, in a very simple sense, you
(14:15):
have some critical factors of production that you need. You
need land, you need labor, you need capital, and you
need energy. We know where a land constrained economy, that's
we consider that when we think about growth, we're all
considering what the demographic effects of an aging and drinking
population might be for the world. Okay, capital availability is
fairly good. There's still plenty of stuff in the ground
(14:36):
we can dig out, so we're not worried about that.
But energy is just as important as these these other
three These are the three things. A couple of other
things that should just be taken out of this. I
think one is that if you look at the government's
own projections previous governments, current governments, UK electricity availability will
(14:59):
rise over time towards the middle of the century and
will exceed by a significant amount our all time peak,
which was in two thousand and five. And perhaps i'd
just give just give some rough numbers. In two thousand
and five we had around about three hundred and eighty
terra watts available to the whole economy about now, it's
(15:20):
two hundred and eighty if the government builds out renewables
and some gas, because of course you need some firm
power to account for the intermittency when the sun isn't
shina the wind doesn't blow, we'll get to four hundred
and fifty terra what hours. And the central problem is
we can decommission on time, that's we're fairly good at that,
(15:41):
but can we actually build out on time? So things
like planning, permission and regulations and all this other stuff
really really matters. And I think the reason why we
just need to take a cold, hard look at this
kind of evidence is because we faced two really difficult
choices at the moment. How do we get ahead with AI?
It has huge potential for productivity gains, but it's very
(16:04):
energy intensive in a sense, it's an industrial revolution as
much as a tech revolution. But then second, we will
need to raise our military spend as a percent of GDP.
And again, to be frank, if you want to be
a serious military power and defend yourself, you have to
be able to keep your own lights on over winter.
(16:25):
And therefore we need to have energy security and we
need to be able to meet our own needs under
any given circumstances, and so I think the worm is
probably turning on a lot of this stuff. But the
key point for me is just look at the very
basic economics. The more supply you have, the biggier economy is.
(16:46):
If you reduce that supply somewhere, you will see some
negative consequences. And we have here a very clear relationship
between our economic problems, which start before the financial crisis,
probably amplified by the financial crisis, and this precipitous for
in our electricity availability, which has been in explicit policy choice.
When we look around the world, we see evidence that
(17:08):
when economies haven't made this policy choice, like America or
South Korea or even Poland, very different things happen.
Speaker 1 (17:15):
Callums. Can go back to what you were saying about
the rise in electricity capacity by the middle of this century.
Back in two thousand and five, we're at three eighty
and you say that under the current government plans we
get four fifty. Given the rise in our population and
the demand there's going to be, that seems not very
(17:39):
much in terms of a rise from three eighty to
four to fifty. That seems like a very small amount
of electricity for a country that is attempting to use
more and more electricity in switch vehicles and all this
kind of thing, and lots of factories over to using
electricity rather than using diesel oil petrol, and an economy
that we want to really participate in the ai REV
(18:00):
that doesn't seem like anywhere near enough to me.
Speaker 3 (18:03):
It's hard to say at this stage. It's probably better
to be on the safe side and say, let's have
more energy than we'll need and see if you can
sell it to someone. We'll benefit through our trade balance
on exports, So that's quite right. What I would say is,
if you take the official population protections, what you do
see is if the government can meet its plans for
(18:25):
raising electricity availability, you will start to see an improvement
in per person energy availability, which which just came. And
so the way to think about this is we should
be gradually removing a headwind to economic growth. And one
of the things you should say is if you make
a claim like I make in what would be true
(18:46):
if I'm right, which is if the government actually builds
out and we start to see in the numbers more
and more electricity made available to the UK economy, we
probably should start to see some upside surprises to things
like per capita GDP and product And it's really as
simple as that. But of course I can't look at
a quarterly data series for the next year and say
whether this is right. This will be a five or
(19:07):
a ten year think. But what I've done is I've
started by asking the opposite, which is, if what the
government says is true, which is there's no trade off
between zero and economic growth, what would I expect to see. Well,
it would be no difference between the economic performance of
the UK, which has introduced this artificial screting on the
energy side, and other economies that haven't. And actually what
(19:31):
we do is we see very big differences.
Speaker 1 (19:34):
It seems that there's a case that you're making very
well for a slightly more pragmatic approach from the UK
towards net zero and approach say something along the lines
of Norway's, which is continued to develop oil and gas
and continue to use hydrocarbons in the same way and
not necessarily expected a fall in the use of hydrocarbons,
but it's nonetheless working towards towards the transition. At the
(19:56):
same time, so maybe there's a case for us to
be a little more pragmatic.
Speaker 3 (20:00):
Yes, I think you can probably see if you have
plans for decommissioning of hydrocarbons and nuclear whether you can
keep that online. I'm encouraged by the government's intention to
allow the build out of modul and nuclear reactors, hopefully
anywhere in the country.
Speaker 1 (20:18):
Although some rather depressing press on that earlier in the week,
suggesting that was one of the things that Rachel Waves
was planning to row back from.
Speaker 3 (20:25):
Let's see one thing I would just say here, which
is really the unfortunate point in all of this. The
UK is, on its own a big economy. We're not
a small economy by any stretch, but our carbon emissions
are less than one percent of global emissions, and global
emissions have been rising dramatically over the past twenty years.
(20:46):
We've almost half hours territorial emissions. There's a slight nuance there.
We judge our success in reducing emissions with territorial emissions,
which is what comes out of the UK economy. But
of course, if what you do is you de industrialize
in you'll our production to move elsewhere. If that production
involves lots of hydro carbon use and pollution, and then
(21:08):
you import that that doesn't count in this territorial emission.
So you have this very unfortunate situation where the UK
seems to have paid a very heavy price in terms
of economic growth, in terms of productivity, but critically living standards.
And you think about all of the political challenges that
we've faced over the last few years that are linked
to the real indignities that come from stagnant living standards,
(21:29):
without question, and the result is, because we contribute such
a small amount to global emissions, we have not changed
the dial. We have not changed the global overall emissions story.
We've just generated low economic growth, weak productivity, de industrialization
and all of this doesn't actually change the fundamental story
(21:50):
when it comes to the global carbon picture. And so
we need to ask a very serious question whether or
not this has been remains would be a sensible policy
choice for us to make.
Speaker 2 (22:03):
Yeah, And the point of it is that that's not
saying abandon. He was just saying that during the transition
period where we don't have nuclear fusion and we don't
have batteries and we still haven't built enough nuclear power stations,
we should maybe be keeping things like natural gas more
aggressively online because we still need to grow and we
(22:24):
still need to find solutions. And I suppose the other
problem is if we've get economic stagnation, then we're also
not generating any innovation, and innovation is one of the
things we need to make this actual switch to net
zero actually work.
Speaker 3 (22:38):
That's exactly right. The richest economies in the world, which
are essentially the most productive economies in the world, use
energy most efficiently, and so becoming richer is a good
and obvious way to become more energy efficient. There are
another couple of things just to throw in here, which
is that the state of the world has changed. We're
(22:59):
much more vulnerab than we once were to external geopolitical shocks,
and at present we're a net hydrocarbon importer oil and gas.
We have not huge, but significant reserves of this. We
could make a choice to say, since we're still using
this stuff, why not protect ourselves against some of these
choices by exploring some of our own supply potential. That's
(23:22):
one thing, But also keep in mind that, of course
renewables have fantastic potential. The marginal cost is extremely low.
The wind always blows, the sun we have this giant
nuclear reactor in the sky that's just giving off energy,
and this is very sensible to try and tap this stuff.
But a lot of this technology requires critical minerals which
(23:42):
we don't have in the UK. We're going to have
to import these minerals, and of course they're expensive because
everyone's trying to do this all at the same time,
Which means what we should keep in mind is even
as we transition towards majority renewables with a baseline if
something like gas resolve these intmisciency issues, we should consider
(24:05):
the fact that in this world where geo political shocks
are common, that we may still suffer these external supply shocks,
not necessarily directly through the energy that comes through trade,
but actually through some of the critical minerals and some
of the capital goods that are required to maintain and
build out this stock. So we just need to take
a cold, hard look at some of these choices.
Speaker 1 (24:27):
Yeah, this is another one of the Another one of
the conflicts that has little discussed is that we talk
about how important it is to have a shift towards
renewables for our energy security, but of course it's not
actually a secure form of energy. If we cannot continue
to have access to the wear earth metals that we
might need. So China, for example, at the moment, is
sixty percent of global rare earth mining, ninety percent of
(24:50):
the processing. But then in context, the US is only
nine percent of the mining, and in the UK I
think is an egible number. I'm not even sure we
mind anywhere else at all?
Speaker 2 (24:59):
Do We don't think so.
Speaker 1 (25:01):
So with that in mind, there is no energy security
in using only renewables or making a major shift to renewables.
Speaker 3 (25:10):
One might make it an even broader point just to
say that if you want Britain to be more secure
in future, pick the economic path that has the maximum
probability of making you as rich as possible, and that
may involve just completely throwing open the doors on some
(25:30):
of our energy because if America, China some of the
other big consumers of hydrocarbons say actually, no, we are
going to continue to use this stuff, We're going to
continue to pollute. Really, what is the use of the
UK going in the opposite direction? Given that we actually
(25:50):
can't change the circumstances in the world all that much.
That's an unfortunate policy choice to have to make it
wouldn't please me if we had to make that policy choice.
But one of the key things when it comes to
economic policy is you have to just take the world
as it is, not how you would like it to be.
And of course it would be nice just looping back
to the start if there was no trade off between
(26:12):
economic growth and net zero. But suppose that there is.
Suppose there is actually a trade off between say net
zero and military security. Suppose there's a trade off between
net zero and funding our growing pensions liabilities, military spend,
pensions liabilities. All of this requires economic growth. And if
the choice by pursuing that zero is we don't achieve
(26:34):
any economic growth or at least growth, that's not satisfactory.
We need to decide which cost we're willing to take.
And actually, the thing to point out is because our
net zero policy doesn't really influence the world picture when
it comes to carbon, the choice may actually be fairly
straightforward for us. You know, if we said, actually we
(26:56):
should pursue at zero, we should accept the lower economic growth,
and we might want to pay a choice living standards.
People choose to do that. That's absolutely fine. I'm an economist.
It's not for me to say, which I think is
the right way to go. It's just to say if
you do this will happen. That's the best I can do.
But people should be made aware that if you make
that choice, you might not actually get what you want,
which is the clean air in the limited rise in
(27:16):
the global temperature.
Speaker 1 (27:18):
There is a view that none of this matters, and
that the UK should be a global leader in the
energy transition and in the race to net zero racist
because no one else seems to be running, that we
should be a global leader regardless of what anyone else
is doing. Now, I suppose the obvious answer to that
(27:38):
is if no one's following you, are you leading? Well.
Speaker 3 (27:43):
I don't think I could put it much better than that.
The one thing that I think we should keep in
mind is that in most parts of the world, living
standards are much lower than they are in the UK,
and security is much lower. And if you want to
set the right example, a really straightforward way to do
that is to have a fast growing, dynamic economy. And
(28:03):
so when you think about global influence, typically the economies
that influence the world are the ones that have the
most dynamic economies. Because the thing that people really need
and really want and should want, is to become richer
and safer and better fit. And therefore think it will
be difficult to convince people that we're leading you down
(28:24):
a path that won't improve your LIVN standards and won't
make you safer, and won't improve your food security and
all these other things. But in the end it's the
right way to go for all these other reasons, I
don't find that very compelling. And now, of course this
is a political point, but the UK is gradually becoming
less important on the international stage. Twenty to twenty five
years ago, the UK mattered much more. We also had
(28:46):
a much stronger economy, We were a bigger share of
global GDP, we had genuinely dynamic industries. And as our
economic dynamism has weakened and other fast growing economies have
moved ahead, they have naturally taken our place, and they
shape global trends and they influence other economies more than
(29:06):
we do.
Speaker 2 (29:06):
Coming back to the other problem is if your economy
doesn't grow, then you don't innovate and you don't come
to a solution for this. I think that's because I
don't want to be able to come away from this
thinking that all right. So it's a choice between a
dirty world that's growing and a clean world that isn't.
It's the things that you If you don't have economic growth,
(29:28):
then for example, we would never have come up with AI,
and EI might require energy, but AI might also who knows,
solve nuclear fusion in the next ten years. Maybe who knows,
it's always next ten years. But the point is that
if you don't have the innovation driven by inexpensive energy
and the ability to use more and more of it,
then we're actually looking at collapse really eventually.
Speaker 3 (29:50):
Let me just make clear what I am signing the
report and what I'm not signing the report. I'm not
suggesting that we should abandon zero. That's in fact, I'm
not really making any policy recommendations at all. What I'm
doing is taking at face value what our net zero
policy has produced so far, which is a reduction in
energy availability through decommissioning of dirty forms of energy which
(30:15):
has not been offset sufficiently by renewable capacity. I have again,
this is not a policy prescription. If the quickest way
to rapidly increase the available energy to the UK economy
is through rollout of wind and solar that's probably the
policy choice to make. If it's nuclear, that's the policy
(30:36):
choice to make. If it's gas, maybe that's the policy
choice to make. It's really not to have a preference
in all of this, but I fully agree to your point.
Look to the US as the example of a country
where energy costs a low availability is extremely high. It's
the most innovative, dynamic, major economy in the world, and
(31:01):
UK tech companies startups. We're great at that, but then
they have to make a choice where can we scale.
And what you need for a company that wants to
scale is cheap, reliable energy that's not vulnerable to global gyrations.
And we can't provide that, but America can, which is
(31:21):
why companies migrate to America. During twenty twenty two, when
Europe was throttled by gas supply shortages following the Russian
invasion of Ukraine, America continued to grow. If you're a
company deciding in this unfortunately more risky world where you
might want to spend the next ten years trying to
(31:43):
grow your economy, and if you're a highly productive company
that requires lots of cheap energy, the choice is to
go to the US.
Speaker 1 (31:51):
I think that You've given everyone a lot to think
about here, and I hope that Ed Milivan will listen
to this and have a little thing. Maybe not, we'll see.
That's like, come on and discuss anyway. Callum, thank you
so much for joining us today. We really appreciate it.
Speaker 3 (32:04):
That was my great pleasure. Thank you so much.
Speaker 1 (32:08):
Thanks for listening to this week's Marin Talks Money Debrief.
If you like us, show, rate, review, and subscribe wherever
you listen to podcasts. Also be sure to follow me
and John on ex or Twitter at Mariners w and
John Underscore Steppek. This episode was produced by Sumasadi Production
Sport and sound design by Moses and
Host
Merryn Somerset Webb
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