INTRODUCTION
The EIC was established in 1943, bringing together the UK’s top engineering and manufacturing companies in the supply chain, to advocate for winning a higher share of domestic and global downstream petroleum projects. In the decades that have followed, the energy industry here and around the world has expanded and evolved significantly, transitioning multiple times to embrace new technologies, such as nuclear, gas, wind, solar and, more recently, hydrogen and carbon capture. EIC has also expanded and evolved, in step with our members, becoming energyagnostic and global.
Importantly, each phase of the supply chain’s transition has been enabled by learning from, and leaning on, the UK’s world-leading oil and gas capability. As the industry transitions time after time, so do our members.
Today, we continue to advocate for our members as the voice of the energy supply chain, across all energy technologies, and in all regions of the UK, providing our members with the tools, data and networks they need to prosper, invest and grow, domestically and internationally.
Our members are active across the whole value chain from top to bottom. We proudly represent companies active in
all legacy and emerging energy sectors, including oil and gas, renewables, petrochemical, marine, transmission and distribution, biomass, sustainable aviation fuel, energy from waste, nuclear, power, hydrogen, carbon capture and energy storage
Our core purpose is two-fold. Firstly, to help our members understand the global and fast-changing energy markets so they can make timely and betterinformed decisions, ultimately to help them win more business.
Secondly, our members are typically active in more than one technology and operate in more than one country. They need policy to be aligned across technologies, and they need a joined up domestic and international approach to energy. We work with them to deliver their asks and market insights to policy makers, advocating for our members as part of a critical global supply chain.
What we have seen in the UK over the past five years, from our members’ feedback and our data has helped shape our asks of the new government. These reflect the challenges and opportunities that our members face and which need to be addressed, to enable the supply chain to grow.
We do not reach net zero without oil and gas”
“(...) as the engine of skills, investment, reputation, capability and global reach. We simply do not have the skills and knowledge in the energy sector to deliver in new technologies without those already in oil and gas.”
FOREWORD
The UK has a very disjointed system of setting and implementing energy policy. Westminster, devolved governments and assemblies, Mayors, clusters and local councils all have varying licence to make or adapt energy policy. This approach has led, alongside the high number of Energy Ministers, to a slow and siloed approach to energy policy delivery. Over time, these changes and uncertainty have led to instability and an unwillingness to invest.
When key policy decisions are made, it is too often at an overarching level with a handful of major energy players, there is little engagement with the thousands of SMEs (Small and Medium Sized Enterprises) and larger organisations that operate domestically and internationally and who make up the vast majority of the supply chain.
What works for the major energy players (developers, operators, large original equipment manufacturers and Tier 1 contractors) does not work for the vast majority of the supply chain and our innovators.
We see aspirational UK content mandates reflected in contract systems with no accountability. With innovation funding stopping after first trial, we see SME’s struggling to find the time to navigate the complex funding landscape.
We see those companies aiming to move from ‘medium’ to ‘large’ sized suddenly excluded from funding opportunities.
We see EU barriers to people. We see tariffs and customs taking more time and cost to navigate, even though the EU is still, just, the UK’s largest export market1
1 Survive & Thrive VIII 67 companies UK business units were interviewed. Of these 49 identify Europe within their top 5 exporting regions. Of these 49, 6 classed Norway as Europe and this was their only export market.
In December 2020, in the run up to COP26 in Glasgow, UK Government policy changed so that, apart from a small number of exemptions, it would stop supporting companies active in hydrocarbon work internationally. But since then we have seen much change: the world’s response to the pandemic, war in Europe and the Middle East, a cost-of-living crisis, a supply crunch, US-China tensions and now a looming skills shortage.
Yet changing the remit of UK Export Finance and all government departments, and British Embassies around the world, to now be largely unable to engage with ‘oil and gas’ companies, or to offer them meaningful support, has led to substantial difficulties for our members who are looking to export.
We have seen companies struggle to access working capital, innovation, and growth-related funding because, for most part, their main business streams are still oil and gas. It does not matter that the projects they are seeking to diversify into, by investing and exporting, may be linked to renewables, decarbonisation or newer energy transition technologies; it matters only that their profits, or the profits of their customers, currently largely come from oil and gas.
Companies are unable to access finance to seed and root energy transition
capabilities, let alone export new technologies, meaning we put our supply chain at a trading disadvantage globally. We risk companies leaving the UK entirely, to explore more attractive investment and innovative markets like the USA, Australia and India. We risk them simply not being competitive2
Without funded and competitive access to international projects, and with there not being enough projects domestically to support them, we are seeing companies diversify away from energy altogether 3
We do not have energy transition related work to feed the supply chain who currently therefore still need oil and gas activity to survive. We do not reach net zero without oil and gas as the engine of skills, investment, reputation, capability and global reach, as past transitions have proved. We simply do not have the skills and knowledge in the energy sector to deliver in new technologies without those already in oil and gas4.
We are seeing restrictions placed upon our domestic supply chain which is greatly harming their access to global export and international trade opportunities.
The insights sourced from our members, from EIC proprietary databases and from EIC research and reports, including our Survive & Thrive
² Survive & Thrive VIII, 67 companies UK business units were interviewed. Of these 67, 62 export globally and 56 of the 67 also have manufacturing bases throughout the world.
³ EIC Survive & Thrive VIII. Out of 31 companies who were diversifying, 8 were into non energy sectors including, but not limited to, Sport, Food and Beverage and Pharmaceutical.
4 EIC Net Zero Jeopardy 2024. 61% of respondents agreed that net zero is at risk due to lack of supply chain capacity, with specific challenges in technology and equipment availability.
and Net Zero Jeopardy publications, have shaped our asks of government. These asks will allow the supply chain to seed and root valuable new capabilities and capacity, to accelerate the delivery of Net Zero 2050 obligations.
Our members are increasingly diversifying and increasingly acting as an integrated and international supply chain. Policy should reflect that.
EIC’s 2024 manifesto lays out four key policy points relating to:
• Integrated Supply Chain
• Energy Transition
• Exporting and International Trade
• UK on a Global Stage
Integrated Supply Chain
82.9% of the UK’s energy supply chain is reliant on oil and gas. 44.7% of that oil and gas supply chain is also diversified into renewables and net zero technologies. Just 15.1% of our UK renewables and net zero supply chain grew out of nonoil and gas capabilities5 As you can see, the UK energy supply chain is largely integrated, but UK policies assume and encourage siloed supply chains, which is hurting, not helping.
The energy supply chain in the UK comprises more than 3,600 businesses6 servicing customers across all energy sectors domestically and internationally. Making policy for technologies in siloes causes problems for the supply chain where there are competing pulls on regions, available funding and growth. Indeed, support of one, while not recognising
5 EICSupplyMap, defined as companies with revenues of more than £1m Correct as of May 2024
6 EICSupplyMap
another, will logically and quickly hamper their ability to deliver and grow.
EICSupplyMap, EIC’s energy supply chain database, maps the capabilities of all sectors, regions and industries making up the UK supply chain. Using this data, it is possible to get a thorough breakdown of the UK supply chain. It is worth noting that since companies work across multiple sectors these percentages will not add up to 100%. Mapping energy industries (see chart 1), oil and gas has the largest number of associated companies, coming in at 82.9%. By contrast, power and renewables sit at 42.1% and 39.2% respectively.
Graph 2 gives a more complete look into the supply chain by looking at specific sectors within its respective industries. Looking top down, you can begin to paint a picture of the most active parts of the supply chain. The top three sectors, Upstream, Midstream and Downstream, all oil and gas related, make up the largest
proportion of companies involved. This is followed by Conventional Power and then Offshore Wind which both attract around 1/3 of the total supply chain. Moving down the list of companies involved, Nuclear comes in at 26.7%, which is then followed by various renewable sectors such as Onshore Wind and Solar sitting at 22.1% and 17.7% respectively. Due to the infancy of energy transitional sectors such as Hydrogen and Carbon Capture these sectors currently sit at 3.5% and 2.7% respectively, however as projects come to FID (final investment decision) in the UK and internationally, we would expect these numbers to rise significantly.
As can be seen from these graphs, working across numerous technologies is complex. This is exacerbated when there is no coherent plan and engagement with the whole supply chain, beyond the normal major players, to ensure that new policies work for them.
SUPPLY CHAIN BREAKDOWN (INDUSTRY)
of Supply Chain
SUPPLY CHAIN BREAKDOWN (SECTOR)
The Energy Profits Levy, while seen as a tax on operators, also has a knock on effect on the supply chain7. If projects stall, project costs increase, or projects are stopped altogether, the bedrock of the UK energy supply chain, namely oil and gas, will not deliver for future transitions. We will see reduced activity, greater diversification away from the energy sector altogether (losing capability and capacity desperately needed for net zero delivery) and a move away from UK headquartered companies to other countries.
Those working in the oil and gas sector are the backbone of the energy supply chain’s capacity, capability and jobs, and consequently are also the best platform to build on for net zero and renewable supply chains.
7 EIC Survive & Thrive VIII
In simple terms there is not one ‘good’ supply chain (i.e. renewables) and another ‘bad’ (i.e. oil and gas) as policies are beginning to reflect. There is only one increasingly integrated energy supply chain.
We should nurture our energy supply chain that has such a strong reputation domestically and around the world. We should encourage the seeding and rooting of all the capabilities we will need for net zero compliance, leveraging the oil and gas strengths and skills we have to accelerate the journey to net zero solutions.
Part of this nurturing involves identifying the critical engineering and manufacturing capabilities we currently possess, as well as those we will need in the future to support energy-security and net zero challenges. Those which need
to be developed8 and will need suitable policies developed in conjunction with the working groups already in existence to ensure we create and protect strong and healthy domestic, competitive and exportable capabilities.
Finally, local content requirements are becoming increasingly tricky to navigate for UK companies when it comes to UK
Asks:
projects. We see our members unable to successfully bid for work when there is no legal requirement. However, they are also struggling in the international market and missing out to other companies with more of a local presence (regional local content requirements). With the limited transition projects coming on line this means that we are seeing low margins and low take up of work in these sectors.
1. De-silo energy policy: In terms of siloed energy policy, we are asking that policymakers should agree on an overarching target and then ensure that all relevant groups are feeding in at the relevant stages. Rather than pitting CCUS against Hydrogen and Offshore Wind against Onshore Wind, (for example), we should have a system whereby we have open and clear dialogue between all the relevant working groups. This will ensure the voice of the supply chain is heard, incorporated and their ability to work across all technologies is respected. We need a check and balance approach to siloed policy across governments and devolved administrations as well.
2. Listen to the supply chain: Recognise that an increased tax on operators will have a negative effect further down the supply chain. Understand that this will, and is, impacting on the supply chain who are looking at stalled and reduced work in the UK oil and gas sector. Engage with our members to understand the full impact this will have on them and engage meaningfully through the EIC to understand the complexities of how to ensure any tax regime is not detrimental to those responsible for delivering net zero.
3. Upgrade capability: In terms of matching new capability to meet the needs for increased net zero activity, work with the EIC and other relevant groups to identify actions to ensure capacity and capability can be upgraded, seeded and rooted, and quickly enough to protect the UK’s ability to continue to be competitive.
4. Reassess local content regulations: While there are upsides to having an aspirational target, there is a lack of transparency in local content outcomes without more binding regulations. Engage with our members to ensure that any local content requirements deliver critical capability investment, and that actions are not delegated down the contract chain resulting in small businesses taking the brunt of the load.
8 Hydrogen UK Supply Chain Analysis carried out by EIC. Some components for Hydrogen have global supply chains, in which there are only a few players which support the global market. “It is worth highlighting that that the UK has no domestic supply chain for air separation units, carbon capture technology manufacturing and reformer packages. There are also very few manufacturers of gas turbines and compressors within the UK. This lack of production should be of concern due to how many industries will be procuring these items, alongside the hydrogen industry.”
Energy Transition
Our members tell us that they are eager to diversify into all areas of the energy transition but that the pipeline of domestic projects, in all energy sectors, is unclear and faltering.. Businesses need certainty of policy and a pipeline of projects, on a minimum 5-yearbasis, if they are to gain their own shareholder approval for investment.
EIC Final Investment Decision (FID) data9 reveals that, on a global basis, oil and gas and large new nuclear projects, both fully regulated and mature industries, have the best FID rates at 33.7% for upstream oil and gas, 20% for midstream and downstream oil and gas and 39% for nuclear new build. This compares to only 5% for fixed offshore wind, 6% for carbon capture, 4% for hydrogen and 0.1% for floating offshore wind.
9 EIC FID data as of June 14th 2024
FID data is powerful, as it represents the threshold when the supply chain can and will invest. Without FID, the many project announcements, net zero ambitions, and policy pledges are simply not bankable for the supply chain. The lack of FID in renewable and net zero technologies underscores the fact that we lack the business case and the regulated processes to drive growth and demand. Upcoming FID-dates for critical UK net zero projects are unclear and further delayed. Economics and risks are high, and investors are increasingly risk averse. This lack of certainty is resulting in a stalling of work for the supply chain.
There is a need for immediate, coordinated action to align project FIDs with net zero targets, emphasising the potential of overcoming barriers through collaborative efforts, demand stimulation, technological innovation and robust policy frameworks.
With the EPL, the oil and gas outlook is no better. The supply chain and its investors have seen delays and cancellations
before. We are told this environment feels the same.
Alongside this, the available funding for ‘green’ technologies is high, but the supply chain is again penalised because, for many, the bulk of their business is still in oil and gas. Having
the majority of your profits coming from oil and gas work means they are not eligible for green financing, be it equipment, grants or expansion funds through UK Export Finance. This means they are unable to transition properly, nor compete effectively. We are hamstringing our supply chain.
Asks:
1. Timelines for project certainty: Through tools like GIGA, the CfD process, the RAB model and planning the energy infrastructure (including the grid), develop a pipeline of project certainty to deliver the required investment and investor confidence, allowing the UK to upskill, transition and deliver on its net zero targets.
2. Provide a clear energy roadmap: In the UK we are missing a clear energy roadmap and dashboard which plots out full timescales of all the projects across different technologies and regions. Such a tool would greatly help the supply chain, as well as investors and policy makers, to identify credible timelines, bottlenecks, capacity and skills shortfalls, and would signpost critical investments needed to build supply chain capacity in the right place at the right time10. Work with the EIC, our members and the numerous groups we sit across to enable joined up conversations and support the development of a clear energy roadmap.
3. Access to finance needs to be reassessed: We need to assess the availability of green finance for those who are transitioning but still have profits in oil and gas. We need to review funding opportunities for ‘small’ business expanding to ‘larger’ ones, that miss out on grants and funding. Work with our members, UK Export Finance and green finance options to ensure that we are not penalising those further down the supply chain at the expense of those at the top.
10 EIC Net Zero Jeopardy Report 2024, 45% of participants identify inconsistent and unclear policies as a major obstacle to achieving net zero targets.
Exporting and International Trade
implement, and hence is also the least used growth strategy. This has been the case for the last eight years11. Factors such as the high cost of doing business in new regions, an expected minimum period of three years to turn a profit, regulatory constraints, taxes, customs, the necessity to find a trusted local partner, lack of on-the-ground support and local content requirements all contribute to these challenges.
The same EIC Survive & Thrive research showed, for the first time in 2023 and confirmed in 2024, that other
opportunity for the UK government.
The export finance previously available has been substantially reduced following the hydrocarbon policy shift in 2020. Despite working with policy makers to report the unintended consequences the policy remains in place. We are now seeing companies lose access to finance and make decisions to seek opportunities elsewhere12
We have also seen a shift ‘on-theground’ in the availability and provision of in-country export assistance and
11 EIC Survive & Thrive Editions I – VIII. Full figures are 8% in 2017; 19% in 2018; 12% in 2019; 15% in 2020; 15% in 2021; 13% in 2022; 6% in 2023; 7% in 2024.
12 EIC Survive & Thrive VIII “…we now have a middle east manufacturing plant to support Middle and Far East work, will proceed without help and leave the engineering in the UK…”
support for energy sector companies. The reduction in support is hindering the ability of companies to take advantage of opportunities internationally and we are at serious risk of limiting the UK’s growth potential13
Not only has there been a reduction in the support offered overseas, but we also see projects progressing more
Asks:
quickly in other regions. Available funding is targeted in a more strategic way, such as in the US with the Inflation Reduction Act (IRA).
With Brexit, increased time and costs associated with trading and legislative issues such as CBAM we are seeing a real restriction placed upon our members14
1. UK Export Finance – make fit for purpose: Reassess the offering of UK Export Finance based on member feedback in terms of available finance for exporting and design a system fit for purpose for the supply chain. It needs to be simpler, easy to access and find information on, as well as a more consistent and clear approach to energy transition, technologies and oil and gas.
2. Simplify trade with Europe: Ensure the regulatory framework for exporting and developing within Europe is as easy as possible. We have seen significant delays, increased costs for transport and added bureaucracy and documentation. Look at regulatory frameworks and the Green Deal to ensure UK companies can compete and have ease of trade across the border. (e.g. It is easier now for some members to export to Chile than Europe.)
3. More trade assistance needed: Open up the work and knowledge of Department for Business and Trade. Members do not feel that help and information is visible when working in oil and gas as well as renewables. Overseas support is critical in developing new markets.
4. Target key energy markets: Work with the supply chain to identify key markets which are good for the energy transition, not just Government to Government targets. Markets such as North Africa, Kazakhstan, Chile and India are all emerging markets with growing interest in the supply chain, but receiving little or no support from the UK government. We need better communication, increased trade channels and support to develop these and to target Foreign Direct Investment. 13
UK on a Global Stage
The UK has consistently delivered more than is expected in energy terms on the global stage. Whilst in the early stages, early indications from the global expansion of EICSupplyMap are that the UK, with more than 3,600 companies, in quantity and capability terms, is the third largest energy supply chain in the world after the USA and China. The UK’s relative scale and the reach it provides should be seen as providing a significant competitive advantage. To capitalise on this advantage and kick-start new export growth policies, we need to act now, or risk losing ground over the next 3-5 years.
We also know that the world’s clean energy investors see the UK’s portfolio of net zero projects as highly desirable to invest in, but this may change if we fail
to move forward with the next round for net zero projects quickly
On a global stage, the UK is a leader in net zero targets and policy, being the first to reach 50% emissions reduction from the 1990 start point. COP26 was a successful platform to promote the UK’s legally binding 2050 commitments and roadmaps. These credentials are positive but also just snapshots in time. To continue leading, we must continue to act 15 .
The UK must be competitive, our supply chain is international and diverse. They will continue to take opportunities elsewhere, but they will not continue to be based in the UK if it does not make business sense for them to do so.
15 House of Commons Committee of Public Accounts. Support for innovation to deliver ne zero. 15th November 2023
We should be proud of the progress which the UK has made with net zero to date and we should
Instead, it is talked about as a homogenous being. And this is not serving it well.
It is time to be better, to promote the global, world-renowned, integrated supply chain we have, their expertise in transition, their global footprint, and their ability to move, shape and drive innovation. We should point to where
the UK can attract inward investment, to engage in wider collaboration for global trade and sharing of solutions. This will help anchor the UK energy supply chain here.
In our Survive and Thrive work, we asked for greater Government support for growth and international development16. Our members are clear, that we need to highlight and promote the UK’s expertise, and that this will accelerate further inward investment.
Asks:
1. Matchmaking for net zero: As part of facilitating the UK on a global stage the UK must become better at enabling access to more international markets, especially those within the energy sector. Work with industry to match supply chain capability in different targeted countries to net zero opportunities
2. Reinstate meaningful on-the-ground support: Reassess, and improve, Embassy and on-the-ground support to enable greater involvement in country. Through this, also look to reinstate Trade Missions, including those that acknowledge oil and gas relationships to further the energy transition
3. Encourage international collaboration: Ensure regulatory frameworks, international collaboration and trade agreements are targeted, enabling the supply chain to be competitive. This includes greater work to ease the painpoints post Brexit (movement of people, tariffs etc)
16 Survive & Thrive VIII. Just under half of those questioned (30/63) needed increased government support in terms of regulatory frameworks, international collaboration and Trade Agreements and work around the political and economic environment in new markets. Reassessment of UK Export Finance (30 respondents) was also high on the list of needing to be reviewed in order to raise the presence of UK companies globally.
ENERGY POLICY & STABILITY GOING FORWARD
The UK has had a sustained period of political instability. Changing Energy Ministers, Chancellors and Prime Ministers, and merging and changing focus of government agencies and departments. With no lasting, clear industrial strategy for 2050 industry has found it hard to secure investment and know how and where to focus.
While it is true that the markets will take steps independently of Government, it is also true that we need all signals to be aligned.
We need policy to focus on projects which can get across the line. We need a ramp up of project pace and we need to be very, very clear on what the timelines are for the next 5-10 years.
The supply chain needs their collaborative and integrated approach to be replicated in government, needing all sectors and departments to work together, to ensure that any framework is holistic. We cannot continue to have policies
which are intra-party in scope and subject to change and removal if they don’t suit a new political narrative.
We need to ensure that EU regulation is taken into consideration when looking at UK regulation to enable our members, not burden them with more red tape and time delays.
We need to look at the grid as a matter of urgency and ensure that we have the capacity and capability to deliver at pace while our supply chain has one eye on international markets which are more politically stable and financially secure.
In conclusion our members, the SME’s, the powerhouse of the energy transition, needs to be listened to and taken into consideration. It is those companies and leaders that we need to nurture and to understand their experiences.
They are invaluable and we have a real opportunity to make a difference.
Let’s not lose it.
ABOUT THE EIC
The EIC is unique. We are the only trade association globally which has scale and diversity. We are exclusively supply chain focussed and have 100% in-house capabilities. We are energy agnostic, populate and maintain our own proprietary data, run out own events and have global members.
Through our databases, we track all the world’s main energy projects and assets. We are also building a global database of supply chain companies and their detailed capabilities and subsequent capability gaps.
We have offices in 5 locations, London, Kuala Lumpur, Dubai, Rio di Janeria, Houston and London, we have 60% women in our diverse and inclusive team of 135 people speaking 21 languages.
We hold 160 events globally each year connecting more than 11,000 delegates with key decision-makers and respond to our members needs through influencing and shaping policy. We take into account the global and regional politics of our hubs and work with our members to protect their ability to deliver net zero.
