Mapping British Business: Green technology

DATE: Nov, 11   COMMENTS: 0   AUTHOR: Allan Azarola

Britain’s manufacturers have long entertained hopes that green technology could be the catalyst that sparks a wave of growth in the sector.

The move, worldwide, towards a low-carbon economy and towards less energy-intensive ways of doing things means that there is likely to be huge demand for green technology. Much of that demand, it is suggested, will come from emerging markets.

Governments around the globe have been quick to identify the potential opportunities that green technology can provide for job creation. President Obama, for example, has already pledged to invest $150 billion ( 100 billion) over the next decade on clean energy – about $80 billion of which has already been spent – while the EU has also put up some $2.2 billion for environmental research projects. Meanwhile, according to figures published by Bloomberg New Energy Finance, China last year became the world’s single biggest investor in the field when it committed $34.6 billion to green technology projects. Japan and India – the world’s fourth-biggest polluter – have also announced significant investment initiatives in the past nine months and, in all, last year, some $150 billion was invested in green technology. Indeed, it seems that these alternative investment options have become very popular in recent times, with many investing into the expertise and know-how (from and other groups) to properly navigate these fields as they continue to grow.

By contrast, the UK’s response has been rather more parsimonious, with the Labour Government announcing some 80 million for green technology in October.

The approach in Britain, thus far, has clearly been to hope that the private sector will take the initiative in this field. The Green Investment Bank Commission, whose findings were published yesterday, identified the need for some 550 billion worth of investment in Britain during the next year to finance the shift to a low-carbon economy. The lion’s share of that is clearly expected to come from the private sector. Some of that will be raised from taxes and levys, such as the proposal to raise some 40 billion from selling permits under the EU’s emissions trading scheme but a big chunk will also have to come from traditional investors.

The auspices, in Britain, are frankly not great. While private equity has proved to be an enthusiastic backer of green technology, the sums raised globally by private equity firms to invest in this field in 2009 was almost half as much as in 2008, although this may have been a result of the financial crisis. But stock market investors, particularly in the UK, have shown very little interest. Xetra, Deutsche Börse’s electronic trading platform, has emerged as the main home for green technology companies in Europe rather than the London stock market. It boasts more than 100 companies in the field which have, since 1997, collectively raised more than 12 billion from investors.

Part of the problem – although this is not unique to the UK – appears to be that investors are wary of backing businesses that lack a track record and which often have enormous capital requirements from the off. This is why government grants and incentives are so crucial.

Meanwhile, it is also difficult to get a handle on the scale of activity in the green technology and low-carbon arena. As Robin Pagnamenta reports overleaf, it is claimed that there are now 880,000 people working in the sector in the UK, although it is a reasonable bet that many of those will be working in activities – such as cleaning and waste recycling – which cannot reasonably be described as high-tech.

But all is not lost. There are areas where the UK does have a competitive edge, such as carbon capture and storage, where expertise built up in the North Sea oil and gas sector may be brought to bear. And there are plenty of individual success stories as this, the latest in our series surveying various parts of the UK economy, explains.

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