To kick off a new blog I thought it might be interesting to feedback on a recent “state of the nation” survey of Cleantech companies we have just completed. To get a feel for the current mood of the low carbon sector and gain an insight in to the future growth plans of local “green” businesses, we recently surveyed the membership of the GreenTech Business Network. The following interesting themes emerged;
- We were aware that the East Midlands is well represented in companies working in areas of Renewable Energy and Sustainable Construction but it was surprising to see how many companies are now operating in the broad field of Energy Management with high representations in areas such as monitoring control and management systems, micro renewable technology management solutions, energy efficient lighting, software logistics, energy audits etc.
- Although very much an Sme audience (the average turnover of companies responding was £250-£499k) companies were surprisingly upbeat about their ability to expand in the current climate with many citing the issues of increasing energy cost and energy security concerns driving sales of their products or services. Many companies talked positively about plans for strategic sourcing or partnering, introducing new products or services, moving into new markets and taking on more employees
- However when asked what would prevent them from growing their businesses two issues were uppermost. Inconsistencies in Government policies/support for the sector was their greatest concern. In the words of one respondent;
“The UK is a world leader in low carbon technologies but the Government seems to be going out of its way to undermining us through its Vicky Pollard, Yes-but-no, Energy Policies”
- Additionally inability to access investment finance was repeatedly mentioned as a key growth constraint.
It is worth dwelling on and qualifying this last statement. A few respondents commented on the number of funds now on the market which have the word “Green” in their names although many appeared to be no different in their investment criteria and approach to risk and returns than conventional sources of finance.
The evidence from the survey and anecdotal feedback was that there is money available and banks are lending. However the problem relates to the terms on which finance is being offered. Something in fact I’ve had personal experience of – when setting up my own CleanTech Company I recently spoke to one of the High Street Banks about a start-up loan. The response was that any loan would need to be matched 50:50 and the interest rate chargeable would be “between 12-13%” (!). Not exactly the most attractive of terms and not, it would appear, untypical.
A further financial issue is that many of the Companies surveyed are trying to develop new low carbon products targeted at immature, embryonic or completely unproven low carbon markets. They struggle to find funds to undertake feasibility studies, to develop prototypes, pilot products at scale, protect IPR and fund costs such as due diligence. There is a cost to innovation that many Sme’s are finding it hard to finance. Funding support for such activities, it appears, was available in parts of the UK but has largely evaporated in the wake of the abolition of the Regional Development Agencies.
In summary what emerged from our survey is a local CleanTech sector characterised by;
….a high proportion of SME’s …working in Renewable Energy, Energy Management and Sustainable Construction……who are upbeat in terms of their business growth outlook……….but frustrated by inconsistencies in Government policy … constrained by access to finance ….are very aware of the importance of innovation and are actively developing new products…….have or are developing international links…..employ a high proportion of skilled manual labour as part of their workforce… ..and value the opportunity to network with their counterparts and receive presentations and communications relating to the local CleanTech sector……
So overall, despite some major hurdles which need to be crossed, the local CleanTech sector appears to be in pretty good health and with a bit of support has the potential to be a vibrant source of innovation, employment, and future growth.
This is the blog of CleanTech Business Ltd a “plans, programmes and projects” Consultancy linked to the GreenTech Business Network- the UK’s fastest growing low carbon business network. See www.cleantech-business.com for details of our projects, services and free low carbon business events programme