British business reaches sticking point on energy investment, new research warns
- 79% of British business identify uncertainty over return on investment as barrier to significant investment in energy reduction measure
- Ernst & Young calls on Government to provide greater clarity on Smart Grid to facilitate further investment
- Investment in energy reduction measures reaches sticking point as companies only investing in low cost measures
23 September 2011: Investment by British business in energy reduction measures is in danger of grinding to a halt new research has warned.
The research, commissioned by Ernst & Young, which polled board members in 250 of Britain’s leading companies, revealed that whilst the overwhelming majority of companies have invested in low cost measures such as improved temperature controls (75%) and lighting upgrades (71%), only 12% have made investment in measures with large upfront costs such as microgeneration.
The findings indicate that many of the easiest energy efficiency measures have already been implemented, leaving businesses with options which either require more investment, more time and confidence, or are more operationally challenging. According to the research:
- 53% had made building fabric improvements such as double glazing and insulation, whilst a further 9% plan to invest shortly.
- 52% had made upgrades to air quality including improving ventilation systems, while a further 11% were planning to invest.
- On the other hand, more costly measures are either being completely ignored or dismissed due to their perceived cost. 33% of companies haven’t even considered micro generation, whilst 39% had considered investing but ruled it out due to it being judged not economical at this time.
- Another significant measure to reduce energy costs - changing working practices - has also been rejected in British board rooms. 19% haven’t even considered this, while 39% had rejected it on economic grounds.
Richard Postance, Advisory Partner, Power & Utilities, Ernst & Young urged the Government to act now to give businesses a clearer picture of the future:
“With the grid coming under increasing pressure the Government needs to give business certainty that investing in what are perceived to be higher cost measures such as microgeneration will be worthwhile. Developments like the smart grid represent a huge opportunity for businesses to take advantage of the move towards a lower-carbon economy, but too few businesses understand what it will, or could, mean for them. Without clarity on how upgrades to the nation’s energy infrastructure such as smart grid will facilitate return on investment, business will lack the confidence and security to take the next step on reducing their energy costs.”
The research reinforces Ernst & Young’s call to action, identifying two key barriers to business making significant investment in energy efficiency measures:
- 79% of business expressed concern over the length of time it would take for their investment to show a return. Only 3% of businesses felt this wasn’t at all significant in the decision to make an investment.
- 77% also feared the scale of upfront investment required, again only a small proportion (4%) didn’t feel this was a significant barrier to investment.
Despite these concerns over the cost of investment, British business is well aware of the precarious situation it finds itself in with regard to energy costs. 95% of those polled believed that there will be a significant rise in energy costs in the next 5-10 years. Equally, whilst 70% stated that localised energy black outs would force them to act, only a quarter felt that this was an event that was likely to arise in the medium term.
Encouragingly, the research showed that businesses were more likely to implement measures requiring significant upfront investment if they had a clearer understanding of how future energy developments like the implementation of smart grids could impact them:
- Of those polled, only 5% had a strong understanding of the term smart grid and its implication for investment in energy efficiency measures, while33% had no understanding at all and 34% had a limited understanding.
- Of those who had an understanding of the term smart grid, 45% have already invested in micro generation. While a further 33% planned to invest in the near future. 76% of those who had no or limited knowledge of the term smart grid are not considering investing in micro generation.
Richard Postance, Advisory Partner, Power & Utilities, Ernst & Young, warned that more needed to be done to unlock the next phase of investment in low carbon measures:
”British business investment in low carbon is at a sticking point. Many British businesses have taken first steps, but our study shows that without greater certainty on the return on investment, they are reluctant to commit further. If UK Plc wants to remain globally competitive while simultaneously reducing carbon emissions then providing this certainty must be a priority.”
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Notes to Editors
Additional UK statistics
- 95 % of business leaders believe there will be substantial rises in the price of energy
- 91% say rising energy costs will encourage them to invest in measures to reduce their energy use
- 83% are interested in investing to reduce energy costs but need to know more about potential returns on investment
- 79% are concerned over the length of time for their return on investment to come through
- 77% are concerned over the scale of the upfront costs of investment
- 75% of companies have invested in temperature controls and 71% in lighting upgrades, yet only 12% have invested in micro-generation
- 73% of businesses believe they have already significantly invested in measures to reduce energy costs yet the investments made so far have been in technologies that only have a minor impact such as temperature controls (75%) and lighting upgrades (71%).
- 64% of business see the complexity of implementing new technology measures as a barrier to reducing energy costs (more needs to be done to simplify the process).
- 71% of business prioritise investment in other areas of the business as opposed to energy efficiency measures. They aren’t marrying the significance of energy price rises with investment in measures to reduce this impact.
- 70% believe the risk of localised energy blackouts would have an impact on incentivising them to invest to reduce energy costs yet only 26% actually believe this will happen in the next five to ten years.
- 86% of business believes that regulation forcing companies to implement measures to reduce energy costs is likely to happen in the next 5-10 years.
About the research:
Research was commissioned to survey business leaders on measures that can be implemented by companies to reduce energy costs. Between 9th August and 8th September 2011 Populus interviewed 251 business leaders by telephone. 167 of those interviewed were board members and a further 84 were senior decision makers who authorise, recommend or specify energy related requirements for their business. Sectors covered included Manufacture of Food; Beverages & Tobacco, Manufacture of Textiles & Textile Products, Manufacture of Paper; Publishing; Printing, Manufacture of Chemicals, Prods & Man-Made, Manufacture of Other Non-Metal Mineral Products, Basic Metals & Fabricated Products, Manufacture of Machinery & Equipment, Manufacture of Electrical & Optical Equipment, Construction, Wholesale, Retail; Certain Repair, Hotels and Restaurants, Transport, Storage & Communication, Financial Intermediation, Real Estate, Renting & Business, Public Administration & Defence, Education, Health and Social Work, Other Social & Personal Services/
Kate Lomax