In the looming wake of a no deal Brexit energy supply chain companies are still finding exporting to new markets to be their hardest growth strategy, with many not prepared to gamble on new export investments at a time when the UK’s route out of Europe is still unclear, found a report released today by the Energy Industries Council (EIC).
For the third year running EIC member companies surveyed still perceive developing new export markets as their riskiest growth strategy with the slowest return to profit, preferring to adopt alternative growth strategies such as innovation, digital and diversification.
Investments in digital innovation are particularly exciting with operators and large EPCs quickly moving from theory to practice, becoming increasingly digitalised themselves, asking the same of their supply chain. This provides a huge opportunity for growth, disruption and differentiation globally for UK energy businesses, as the energy sector has historically been slow to adopt digital technology.
Despite 36% of member companies surveyed adopting diversification as their preferred growth strategy, this is down on the previous year which sends a worrying signal that companies are perhaps retrenching back to oil and gas in light of recent stable oil prices, raising longer term concerns about over-reliance again on the cyclic oil price.
Most oil and gas supply chain companies surveyed were reluctant to look at the renewable energy market, commenting that the profit margins are too tight, and competition too tough, with most awards going to European suppliers.
There is also a lack of understanding of just how much overlap there is between different energy sectors and how readily their products can be adapted in parallel sectors like offshore wind.
The ‘Survive and Thrive 2019 Insights Report’ published by the EIC, provides invaluable first-hand information from the UK supply chain and offers a listing of companies and detailed analysis of eight strategies they have employed to grow against a backdrop of a cautious oil and gas market recovery, growing focus on decarbonisation, and Brexit uncertainty.
EIC CEO Stuart Broadley commented: ‘Our research shows Brexit is a having more of an impact now. Sometimes positive, companies who are net exporters are really seeing growth benefitting from the weak sterling. On the negative side more companies are getting frustrated by the lack of inaction around Brexit, damaging their growth prospects in new export markets and Europe in particular. There is a real possibility UK suppliers may need to look for new markets soon.’
Other key findings and recommendations in 2019 include:
- Digital and service and solutions offering diversification from Capex to O&M work are increasingly seen as vital strategies to win new clients
- 60% of companies used a service and solutions strategy
- 32% of companies surveyed have been impacted by the prospect of Brexit
- A lack of government funding or support mechanisms in place for companies wishing to scale-up in UK markets apart from start-up and R&D, exists
- 100% of companies used collaboration as an enabler for other strategies
- Industry bodies should work more closely with major renewable energy developers to promote the opportunities on offer with them
The strategies put in place in the 2019 edition of Survive and Thrive have generated a massive £1.8bn in savings and new orders.
The EIC recently held its inaugural Energy Exports Conference in Aberdeen as a key action in light of the findings in this and previous years’ reports, aiming to kickstart export growth in energy, and inspire the next generation of exporting business leaders, by attracting major operators such as Aramco, ADNOC, BP, Petronas, Shell and Wood who presented more than US$150bn of global project opportunities requiring UK products and services.
To read the full report visit: : https://www.the-eic.com/portals/0/Website/Publications/InsightReports/SurviveandThrive3-report.pdf