Grant Allan, Peter McGregor and Andrew Ross
Fraser of Allander Institute, Department of Economics, University of Strathclyde
Policymakers have been understandably active in identifying economic opportunities for the UK through new and expanded trading opportunities. The recent Industrial Strategy and Export Strategy lay out the UK Government’s ambitions for increasing exports, as well as seeking out specific sectors where the UK has comparative economic advantage. The Export Strategy talks of an aspiration to raise exports to the equivalent of 35% of Gross Domestic Product.
A successful export strategy, one which does lead to increases in the scale of exports, will bring economic benefits – this is unambiguous. What is unclear however is how such outcomes might interact with government objectives in other areas, such as the Clean Growth Strategy (2018), with its focus on moving to “cleaner economic growth”, though, for example the development of new technologies.
With colleagues we have explored this trade-off at the economy-wide level for the UK. Through our work, supported by the UK Energy Research Centre, we have focused on simulating a successful policy which raises the level of all exports. Our results from this – reported last month – found that, overall, an across-the-board export stimulus raises economic activity while simultaneously increasing energy use and emissions.
In our results, increases in energy use and emissions are greater than the economic boost (in percentage terms), so that energy- and emissions-intensity of GDP rises as a result. Employment increases in all sectors, but again by less than sectors’ energy use. This important finding also confirms that, absent any offsetting policy, there exist tradeoffs between a successful export strategy’s impact on economic activity, with effects on environmental and energy indicators.