Cleantech sector expects greater profits in next 12 months

Leaders of cleantech firms around the world are more optimistic than their counterparts in other sectors, a new survey has found.

A survey by Grant Thornton, published on Monday, of business leaders' attitude in the sector, finds the sector expects to continue rapidly expanding, despite the world's pervading economic uncertainties.

It finds that 68% of cleantech businesses expect revenues to increase over the next 12 months. This compares with 52% of businesses in general feeling the same way.

The International Business Report also finds that 62% in the cleantech sector expect profit to rise over the next 12 months, compared to just 38% of businesses in general.

Furthermore, these business leaders appear to be investing in the long-term growth of their businesses.

52% say they will increase research and development spending over the next year. 51% plan to invest more in plant and machinery. Both of these figures are well above the global averages for business in general.

The reason for that optimism is not hard to find. It is because the sector has already been expanding rapidly over recent years: by 31% per year in 2009 and 2010.

Although this rate of growth slowed to 10% in 2011, this is still well above average GDP growth rates.

Even in the United States, the sector expanded by 17% between 2010 and 2011, to $46.3 billion, while China experienced a rise of 77% between 2008 and 2011. The sector there is now worth over $72 billion.

Nathan Goode, global leader of cleantech at Grant Thornton, commented: “The cleantech sector continues to demonstrate remarkable rates of growth.

"Global economic uncertainty is weighing on short-term business growth prospects but the data suggests that dynamic businesses in the cleantech sector are willing to invest in bold growth plans to boost competitiveness."

Constraints on expansion

Regulations and red tape are cited by business leaders in the sector as being the major constraint on expansion. This was mentioned by 41% of respondents, compared to the all-sector average of 34%.

The second constraint is a shortage of skilled workers, mentioned by a further 38%, 10 percentage points above the all-sector average.

This is affecting pay levels in the sector: 79% of businesses are offering workers pay rise over the next 12 months, compared with only 68% of businesses in general.

“Demand for cleantech products and services is fairly robust. China, the United States and Europe account today for around 50% of total global output, but their share of cleantech output is nearer to 75% so we would expect them to drive future innovation and growth," said Nathan.

He added that this is still a relatively young sector, “so it's not surprising to see innovation outgrowing talent. However, with unemployment rates high, rapid growth in the sector clearly offers an opportunity for economies to boost employment and output."

He cited South Korea as an example of how policies the government has put in place are encouraging our R&D and manufacturing industries. There, there are incentives and targets for energy efficiency and renewable energy to attract investment.