Table: Value of UK trade in low-carbon and renewable energy products (£ billion, quarterly)
| Period | Exports | Imports | Balance |
|---|---|---|---|
| 2021 Q1 | 12.4 | 14.8 | −2.4 |
| 2021 Q2 | 13.1 | 15.2 | −2.1 |
| 2021 Q3 | 13.5 | 15.9 | −2.4 |
| 2021 Q4 | 14.2 | 16.1 | −1.9 |
| 2022 Q1 | 15.0 | 16.4 | −1.4 |
| 2022 Q2 | 15.8 | 16.9 | −1.1 |
| 2022 Q3 | 16.3 | 17.2 | −0.9 |
| 2022 Q4 | 17.1 | 17.8 | −0.7 |
The global transition to net-zero carbon emissions has been accompanied by a surge in international trade in environmental goods and low-carbon services. After temporary supply-chain disruptions, the growth in global demand for renewable energy machinery accelerated significantly throughout 2022.
Stronger global environmental commitments have boosted the demand for UK green exports. This trend is further supported by a competitive depreciation of sterling against major currencies since late 2021. This exchange rate shift made UK environmental engineering design services relatively cheaper abroad compared to European competitors. Over the same period, relative export prices for UK clean-tech fell by approximately 8%, helping the UK claw back market share in sustainable infrastructure.
According to the Association of Green Manufacturers, "industry confidence regarding export orders of low-carbon technologies reached a record high" in late 2022. However, price competitiveness is not the sole driver of international demand. Long-term success also depends on the pace of capital investment in trading partners and the ability of UK firms to pioneer cutting-edge carbon-capture innovations.
In the years preceding the current transition, UK domestic consumption of imported manufactured appliances created a chronic trade deficit. To meet climate targets and rebalance the economy, the government has increasingly subsidised domestic clean-energy manufacturers.
As global economies recover and invest in national grid upgrades, there is a strategic imperative to transition away from domestic household consumption towards export-driven green growth. This expansion of green exports is expected to yield a strong domestic multiplier effect, creating high-skilled jobs in industrial clusters and deploying underutilised regional capacity. However, a sudden spike in overseas demand, combined with domestic workforce shortages in engineering, could fuel domestic wage inflation.
Extract B states that "industry confidence regarding export orders of low-carbon technologies reached a record high".
Explain two factors that might lead to an increase in the demand for UK exports.
