A new report researched and written by the Carbon Trust and commissioned by Shell Springboard has revealed the UK has an opportunity to triple its exports of low-carbon goods and services. The current £12 billion low-carbon exports could rise to £30 billion by 2020, if the growth rate is increased to 10%. This reflects the rate required to ensure exports reach the UK government’s £1 trillion target by 2020.
The report looks at the growth of more than 180 low-carbon small to medium enterprises (SMEs) and evidence from more than 30 interviews with government and industry experts.
It shows that SMEs are spearheading the UK government’s efforts to realise the nation’s low-carbon export potential by targeting new high-growth markets: low-carbon SMEs are more than twice as likely to export (45%) than SMEs in other sectors and 67% of them are already selling to emerging economies.
To help fulfil this future growth potential, the study identifies a £15 billion annual opportunity in four promising markets, the MUSTs – Mexico, the UAE, South Africa, and Turkey. These markets share favourable business environments including regulatory systems and a strong demand for low-carbon goods and services.
Yet, UK SMEs in the low-carbon sector continue to face tougher barriers than peers in other sectors**. The report revealed that nearly one in four cite raising capital as the primary barrier to exporting, while early stage funding for the sector has contracted by almost 50% since 2012.
Nearly half of exporting SMEs had not partnered with a large organisation, missing out on potential sources to explore funding or business development opportunities.
It advocates coordinated action in three areas to give UK SMEs the best possible chance of capitalising on the low-carbon export opportunity:
- UK Government to redirect some existing financial support to business to bolster risk capital for low carbon SMEs
- UK Trade & Investment, UK Export Finance, and the Foreign Commonwealth Office to provide a more integrated service for low-carbon SMEs with support packages to help unlock growth in emerging markets
- SMEs to make full use of existing support structures to help them succeed in overseas markets
Matthew Tipper, Vice President of Alternative Energies, Shell, said:
“Low-carbon innovation among SMEs is leading to impressive commercial success and their performance offers the UK a significant export advantage. Large companies have a major role to play alongside government and entrepreneurs to foster further success.
“Shell Springboard helps small and medium businesses to develop and scale up low-carbon ideas. Over the past nine years we have awarded around £3 million to promising businesses.”
The report also uncovers a clear domestic advantage to low-carbon SMEs’ global ambition by revealing a material link between exports and revenue growth, job creation and innovation at home. In the past two years, almost half of exporting low-carbon SMEs have hired as a direct consequence of overseas sales, 65% have introduced at least one new product, and 76% have increased revenues.
“The UK has a must-win opportunity to ensure our vibrant low-carbon sector grows rapidly and continues its exciting export success story,” adds Tom Delay, Chief Executive of the Carbon Trust. “Grabbing this golden opportunity with both hands will help the UK’s economic recovery by delivering new jobs, generating growth and by expanding UK exports.”
Energy and Climate Change Secretary, Ed Davey said: “Growth has returned to the UK and low carbon SMEs are in the engine room. The low carbon sector is central to the Government’s efforts to build a new economy, boost exports and meet our responsibilities to the next generation on climate change.
“As this report from the Carbon Trust and Shell Springboard underlines, confidence and outlook is buoyant. The majority of low carbon SMEs are taking on new staff, creating jobs, developing new products and increasing revenues.
“There is no room for complacency, which is why we’ve been driving record levels of investment since 2010, backed by Government support worth £7.6 billion for renewables and £1 billion for low carbon innovation. This is helping to create a true energy sector boom that will support 200,000 new jobs in renewables alone by 2020.”