Mixed picture for the UK cleantech sector: confidence returns but remains fragile

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London 14 October 2011: Optimism in the cleantech sector over the last four months has seen a significant increase, although confidence overall remains fragile, a new study shows. This increase is reflective of gathering momentum around the Green Deal says EY in its latest quarterly cleantech business confidence survey in conjunction with ecoConnect.

Confidence slowly returning to market
The previous quarterly study, launched earlier this year, showed that optimism had fallen significantly due to the government’s Comprehensive Spending Review, the feed-in-tariffs review, Electricity Market Reform and a lack of clarity on the mechanics of the Green Deal.

In the latest survey, which collates responses from 602 UK based corporates, financiers and cleantech companies, there was a significant increase in confidence. 24% of all respondents felt optimistic that the cleantech sector would deliver economic growth in the next year, a significant increase from the last quarter (14%). However, this still falls a long way short of the peak of 65% seen in November 2010.

41% of those surveyed for the UK business confidence report thought that investment in clean energy and technology would increase in 2011 compared to 2010. Even though investor confidence has taken a hit over the past six months, the cleantech and renewable sector as a whole continues to represent an attractive medium and long term market for capital given the global transformation towards low carbon.

UK Government still has some way to go
The transformational scale of clean technology is evident from the sector’s resilience through the financial crisis with investment in clean energy growing by 30% to $243 billion in 2010. With government stimulus packages for the sector still flowing strongly, 2011 is likely to also see growth indicating that global market fundamentals for cleantech remain attractive.

However, confidence in the UK government’s claims that it will be the 'Greenest Government ever’ has remained low. Only 9% stated they were optimistic that the Coalition government will establish the conditions necessary for success in the cleantech sector in the next year and 52% stated they were pessimistic.

Nearly half of those surveyed said that the UK government urgently needs to establish a clear direction, stable policy framework and efficient delivery mechanisms to ensure the UK is not left behind, as other countries exploit the opportunities in these sectors.

Commentating on the findings of the report, Steven Lang, EY’s UK cleantech leader, said: “Our report shows that there are fragile signs of a return to confidence in the sector. However we must not underestimate the scale of the task ahead – amidst the current Eurozone crisis and with Government stimulus packages beginning to tail off in 2012, the path ahead is a difficult one and we expect volatility, despite long term fundamentals remaining positive.”

Lang added: “Much more still needs to be done to stimulate investment in the sector. The Government should take the increase in confidence as encouraging but must not underestimate how quickly this confidence could erode if key ‘green growth’ policies are changed, diluted or delayed”