Optimism in the cleantech sector picks up despite uncertain policy and investment backdrops
London 19 December 2011: Optimism in the UK cleantech sector has witnessed a surprisingly strong increase over the last eight months, claims new research published today by Ernst & Young. However, the market remains less optimistic than a year ago in the Coalition’s ability to establish the conditions necessary for energy sustainability, cleantech economic growth in the UK and greater international competitiveness.
The findings form part of the latest quarterly cleantech business confidence study which surveys 600 UK-based stakeholders: government, corporates, cleantech entrepreneurs, funds and finance providers, and research and development institutions.
Steven Lang, Ernst & Young’s Head of Sustainability and cleantech Services in the UK & Ireland, said: “The findings reflect the resilience and attractive long term fundamentals of the cleantech sector. Despite increasingly worrying financial and economic conditions, and a year of policy uncertainty and change, medium to long term optimism remains relatively strong, and although there is a distinct call for more urgency and clarity over policy, this is no longer eroding confidence in the sector."
Confidence in the sector’s ability to deliver economic growth turns a corner
It has been a difficult year for the cleantech industry, which has suffered from significant uncertainty. Most notably, the effects of the Comprehensive Spending Review; the review of the Feed-in Tariff scheme; and the Electricity Market Reform – resulted in the market’s overall level of optimism plummeting in the first half of 2011.
Nevertheless, today’s findings show that optimism is returning in the sector. Of those surveyed, 37% felt optimistic that the cleantech sector will deliver economic growth in the UK over the next 12 months. This has more than doubled when compared to the April 2011 survey when only 14% of respondents felt optimistic.
Longer term confidence also continued to rise: currently nearly half (47%) of respondents feel optimistic about the UK’s ability to achieve an internationally competitive position in clean energy and clean technology in the next ten years.
Increased concern about 2012 investment level
Despite the overall increase in confidence, only 21% of respondents believe UK investment in clean energy and clean technology will increase in 2012 when compared to 2011. This has dropped significantly from only three months earlier when it was twice as high.
Furthermore, over one third of respondents now believe investment levels will decline next year, suggesting a widening gap developing between confidence in the sector and confidence that it will be adequately capitalised.
Confidence in Government in steep decline
Confidence in the UK Government’s ability to establish a clear direction, stable policy framework and an efficient delivery mechanism to accelerate the UK cleantech market witnessed a steep decline over the past 12 months.
60% of respondents felt that the financing frameworks required to attract sufficient capital for UK cleantech to flourish will not be established in the next 12 months. This is up from 32% when compared to last year.
Trust in the Coalition Government’s claims that it will be the “greenest government ever” also declined significantly during 2011. The market is much less optimistic than a year ago in the Government’s ability to establish the conditions necessary for success.
Steven Lang concludes: “Cleantech in a number of countries around the world is bucking the downturn by benefitting from enhanced government support and increased corporate investment. The UK and Eurozone face a difficult challenge in maintaining their competitiveness in light of deteriorating financial and economic conditions. That's not to say the potential isn't there in terms of innovation and ideas - it’s just that many of these businesses will receive less support from Government than if they were located in a less fiscally constrained environment, so have to fight harder to secure their place in the global market."