Green entrepreneurs have pounced on a report published this week by the Confederation of British Industry on the UK’s Net Zero economy, which it claims expanded by roughly 10% last year, far outpacing the anaemic, sub-1% growth of the country as a whole.

At a time when much of the political discourse revolves around the question of whether the green investment favoured by Energy Secretary Ed Miliband is compatible with the sort of economic growth that Chancellor Rachel Reeves desperately craves, this appears to provide helpful ammunition. For its proponents, Net Zero doesn’t just comprise a significant chunk of Britain’s economy: it also sucks in investment and creates a growing number of well-paid jobs.

“If you spend on something and that thing improves productivity, enhances resilience, and provides you with an asset that delivers long term returns, then yes, you can get richer,” says James Murray, editor of Business Green. One envies Murray’s faith in this green wirtschaftswunder, but sadly the CBI report shows no such thing.

The study looks at the gross value added (GVA) thrown off by a self-defined sector which includes everything from nuclear power plants to waste recycling facilities and wind farms. GVA is a crude measure of output, which has little bearing on the underlying sustainability of an investment. Broadly, it shows where investors are staking their money, which isn’t the same as what benefits the broader economy.

For many years, one of the fastest growing sectors in GVA terms was buy-to-let rental. Before 2008, it was the peddling of credit derivatives and other financial products. Neither of these proved sturdy foundations on which to build the British economy.

The study also glosses over the substantial subsidies and support mechanisms that sustain much of this activity, especially the infamous Drax biomass plant and various wind and solar farms. According to Ofgem, roughly 25% of the average electricity bill comprises “environmental and social obligation costs” — levies added on to support one green initiative or another. It is one of the main reasons why UK industrial electricity prices are the highest in the developed world, and domestic ones are in the top five. This is not helped by the sort of electricity capacity the UK is installing, which is mainly intermittent renewables which require expensive backing-up.

The real debate concerns whether this form of green growth is actually worth having. Stratospheric energy costs are now threatening the survival of the dwindling number of energy-intensive industries left in the UK. Port Talbot has shut its steel-making furnaces, and the Grangemouth refinery has closed. The UK’s car industry is back to levels of output last seen in the Fifties. High costs also deter important emerging industries in power-hungry tech and AI, as well as areas such as electric vehicle manufacturing.

Proponents will argue that subsidies are a small price to pay for kickstarting valuable “sunrise” green industries. But where are these industries? Much of the renewable kit that Miliband is thirsting to install will be imported from China, while the cost reduction story — long the strongest argument for renewables deployment — has gone into reverse. The latest wind auctions produced prices of £55-60 per MWh, 40% higher than those from 2019.

Many believe that if the Government embarks on a race to decarbonise electricity by 2030 — which will require installations at seven times the historic annual rate — these costs will further spike up, rather than down.

The economist Dieter Helm has recalled how Tony Blair once told him politics was about substituting the word “and” in place of “or”: the public had to believe you really could have it all. And it would be nice if this were true in the case of the 2030 goal. But sometimes life is about hard choices. There is little doubt that green investment will increase output in that sector, just as increasing the population generally grows GDP.

More important, though, is what happens to the rest of UK industry. Is it really worth staking everything on a loosely-defined Net Zero sector — still just 3% of the economy — if in doing so you imperil everything else?

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Jonathan Ford presents the podcast A Long Time in Finance and writes the Business Adventures Substack.

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China is trying to catch up with America on artificial intelligence. The Wall Street Journal has reported that Zhipu AI — one of China’s six “AI tiger” LLMs — has released a new model that can rival leading US systems, including Anthropic’s Mythos, in cybersecurity tasks such as pinpointing security bugs. While this marks a milestone in China’s drive to catch up with Western AI capabilities, strong performance on a single benchmark does not mean it has taken the lead. Chinese models still lag behind their Western counterparts in broader capabilities, such as autonomous operation. Skepticism is therefore warranted before resorting to hysterical conclusions, but complacency about the geopolitical implications of China’s AI advances would be an even greater mistake.

On the infrastructure side, Chinese AI is still constrained by access to advanced chips, with American labs way ahead in computing capacity as well as investment. Analysis from earlier this year suggests that Chinese models are likely to be at least a few months behind those in the US. But they are still continuing to make progress, or that the geopolitical importance of AI will be decided only by whose LLM has ventured deeper into the technological frontier. The practical applications of AI, countries’ to capture foreign markets, and the application of AI into the real economy will matter just as much.

Here, China may hold an advantage. As with its dominance across many critical supply chains, Beijing may not need to produce the most advanced AI systems — only those that are affordable and widely deployable. In doing so, it could consolidate global influence by supplying functional, low-cost AI at scale.

Beijing seems to be pursuing exactly that path, developing an AI “open-source” strategy that offers affordable, widely available AI models for companies and individuals to use and modify as they wish. The production of the DeepSeek AI model, which matched the performance of Silicon Valley tools such as ChatGPT at a fraction of the cost for users, created goodwill among Chinese models with developers.

The four most popular models on OpenRouter, an AI hardware platform for developers, are now all Chinese. The goal for China is not only to win the frontier-model race, but to make its systems the default layer of AI adoption across industries and global markets. For most economies, the choice is increasingly between an affordable tool they can deploy now and a more robust one that may be out of reach.

And while the countries adopting Chinese models may be exposed to political pressure and cyber threats from Beijing, safer and more capable alternatives matter little if they are unaffordable. American AI companies are already under pressure to monetize products whose operating costs are rising. If Chinese open-source models become the cheap default for startups, universities, governments and businesses across the developing world, then America’s AI lead will be eroded from below.

Perhaps more concerning for America in the long run is how AI can give Chinese manufacturing even more strength, through the ongoing integration of AI as a general-purpose technology. China’s new Five-Year Plan mentioned AI more than 50 times and includes an “AI+” action plan aimed at spreading AI across the economy.

Beijing has been pioneering automation of its critical infrastructure for years, with promising recent results in increasing warplane production capacity. In that regard, China’s open-model strategy and manufacturing dominance will reinforce each other. Cheap, adaptable models accelerate deployment across the real economy while those deployments generate real-world data and use cases that can feed back into further model improvement.

The United States should not dismiss the importance of its lead in the AI race. That lead worries Beijing, not least because a more automated Chinese economy would also become more vulnerable to AI-generated cyber threats. But nor should Washington assume that China cannot catch up with American capabilities over time.

This AI competition represents part of a broader struggle over tech supply chains and geopolitical influence. Decisions over whether to adopt US or Chinese models could produce a more fragmented global reality, with different regions relying on different cloud providers, chips and security structures. The result will likely be a global economy which is divided into competing spheres, rather than one which produces a single winner.

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Miquel Vila is a political and geopolitical risk consultant focusing on industrial strategy, critical infrastructure and global supply chains.

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