Powering the UK 2012
Investing for the future
- Energy companies have invested more than £8bn a year in the UK over the last five years, and are expected to invest more than £11bn in 2012.
- At some 50% of Gross Value Added (GVA), i.e. the sector's economic value, and around 12% of total turnover, the level of investment in, and by, the sector is much higher than the UK's average as a whole (around 11-12% of GVA).
- However, the current economic and policy environment is affecting investment decisions, resulting in project delays, and the rate of investment is falling.
To meet current energy and climate change policy objectives the sector needs to invest up to £250bn over the next 15 years — equivalent to an average of £16bn a year.
Which investments are taken forward in what proportion will determine total investment, and shape the UK's energy system for a generation to come.
2011 saw real evidence of this step change in investment — increasing 10% year on year to £10.3bn, continuing the trend of the past five years, and compensating for an investment fall in other areas of the economy (overall UK investment fell 16% between 2007 and 2011).
The sector's substantial contribution to the UK economy can only be expected to continue to grow if it delivers the required renewal of the country's energy infrastructure.
However, there are signs new investment decisions are slowing as regulatory uncertainty continues. In our full report (to be published in due course), we will look at potential investors' views on the factors that shape their investment decisions.
Capital expenditure in the power and gas sector, 2007-11
Source: EY analysis based on various external sources, 2012