Diversification and clean growth central to the UK's oil and gas supply chain’s economic recovery amid COVID pandemic
10 July, 2020
In the face of continued market uncertainty, low oil and gas prices and COVID-19, compounded by very tight margins, fierce competition, many businesses are diversifying away from oil & gas into renewable and non-energy sectors finds a new report by the Energy Industries Council (EIC).
This year, EIC’s Survive and Thrive Insight report (Volume IV) which provides invaluable first-hand information from the UK supply chain from 40 representative energy businesses, details the eleven growth strategies employed to grow their businesses during a market crisis. The research shows 49% of companies used diversification, specifically de-risking their revenue sources to rely less on oil & gas going forwards, as their most used strategy.
Although 90% of companies interviewed were still active in oil & gas, with 26% having already diversified into renewables, the report highlighted 72% of businesses diversified into non-energy sectors such as infrastructure, industrial and pharmaceuticals.
For the fourth year running EIC member companies surveyed still perceived developing new export markets as their riskiest growth strategy with the slowest return to profit, preferring to adopt alternative growth strategies such as diversification, services and solutions and optimisation.
Speaking at an EIC Ministerial Roundtable this week Minister for Exports, Graham Stuart MP commented: “Clean growth will be central to the UK's economic recovery, as the Chancellor said earlier this week, and this is shown by our Net Zero commitment and hosting of the UN Climate Change Conference next year. A significant amount of work is underway across government in relation to energy transition, including our new and ambitious Export Strategy, which will contain a strong focus on clean growth.
“I am committed to maximising the economic value that a clean economy can deliver for the UK, as we bounce back from the challenges posed by the coronavirus pandemic, and I look forward to engaging with the EIC to achieve this.”
EIC CEO Stuart Broadley commented:
“This year’s research has underlined how much more resilient UK businesses are to market crises, compared to five years ago when companies had to survive the 2014 oil price crash and the new lower for longer market conditions. Companies have learnt to permanently stay leaner and more agile, accepting in most cases that their future survival depends on no longer being over reliant on the oil & gas sector, which continues to be highly volatile and under pressure from future energy transition.”
Other key findings and recommendations in 2020 include:
- 87% of companies received government support compared to 2019 at 68%
- More DIT support is needed for UK exporters post Brexit, especially SMEs
- Government needs to encourage UK local content to develop new and existing technologies and future exports
- Government should engage with industry before making energy transition commitments that may not match UK capability
- Only 18% of business leaders fully embraced the energy transition
Strategies put in place in the 2020 edition of Survive and Thrive have generated a massive £2.4bn, up on the £1.8bn in savings and new orders in 2019.
Read the full report here