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A 'MUST' win

Posted by David Aitken | 9 May 2014 | Viewpoint
Connected globe for international carbon reduction

SMEs key to growing UK low-carbon exports The global market for low carbon goods and services has been valued at over £3 trillion. David Aitken, Associate Director, Innovation, reveals how the UK’s low carbon business sector can benefit from export opportunities to the MUST countries – Mexico, the UAE, South Africa and Turkey.

 

Things are happening for the UK’s low carbon business sector.  Not only are our small and highly innovative companies growing rapidly, they are also exporting their products and services around the world helping to meet the fast growing demand for low carbon good and services.  Last year that global market was valued at over £3 trillion. Clearly this is not a small beer sector.  No wonder excitement is growing.

New research by the Carbon Trust, undertaken with Shell Springboard, has shone a spotlight on just how successful UK SMEs have been in tapping into this boom market.   Furthermore, it shows how they can play a critical role in helping the country secure its overall goal of doubling exports to £1 trillion a year by the end of the decade. 

These fast growing companies are now uniquely poised to unlock growth and create new jobs through capitalising on the rapid growth of the sector in emerging markets; especially as these countries look to meet their expanding energy demands while minimising carbon and resource impacts. 

Success looks very tempting. It will mean the UK becoming a world beater, tripling the value of low carbon exports from £12 billion a year today to around £30 billion a year by 2020.  This growth would see the UK capturing around 10% of the global low carbon market. Not bad for a set of companies that to many of us are unknown and unseen. 

These UK companies are already exporting exciting new renewable energy, energy efficiency, and waste and water reduction technologies around the world from the US to Europe, to the BRICs. But not content with their success to date our research has found that these entrepreneurs have their eyes fixed on a new set of countries.   They’ve spotted an annual £15 billion export opportunity to the MUST countries – Mexico, the UAE, South Africa and Turkey.

We are predicting that over the next ten years these new MUST markets will be the boom markets of the clean tech industry.  The MUSTs are special as they boast strong domestic demand for low carbon goods and services; have favourable regulatory environments; and outstrip recent BRIC powerhouses in their ease of doing business.

And it’s not just the companies themselves that are doing well.  Our research has found that the support the government is providing, through bodies like the UKTI, is playing its part in enabling these companies to stretch their legs and move to new markets.  The success has been so impressive that we believe there is a strong case for the Government to focus further on the sector and to prioritise it as an engine of growth for the UK’s overall export drive.

There’s a number of things that the Government can do to capitalise on the success of the sector; most notably by re-directing some existing funding to provide risk capital for low carbon SMEs. Our research confirms that low carbon SMEs face disproportionate challenges in securing funding – and the situation, particularly for early stage companies, has been getting worse.

According to the Green Alliance, redirecting just 10 per cent of the money used every year for Research and Development (R&D) tax credits (around 70% of which goes to large companies) would be enough for a £100 million fund to provide risk capital to low carbon SMEs.

There is also a strong case to harmonise and promote existing export support for the sector and to prioritise support to capitalise on high growth emerging markets like the MUSTs.

A few years ago David Cameron acknowledged the potential role of the sector by noting that “the global green energy market…… it’s going to be worth trillions of pounds in the years to come and I’m determined that the UK should have a big piece of that pie.”  

Well the good (political) news is that we can get a big piece of the pie and none of the support needed to bake it requires additional public funding.  But it will require fresh thinking and renewed commitment to transform the local carbon sector from a must win to a real win win by 2020. 

Based on the evidence and success to date we would be mad not to try.

 

Read more on how the Carbon Trust helps clean tech ventures to grow with clean technology incubation and venture support.

© 2017 Carbon Trust
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