Analysis of the Scottish company base and market opportunities: low carbon heating and cooling and water supply and wastewater sectors

Scottish Enterprise (SE), working with Highlands & Islands Enterprise (HIE), commissioned Innovas to carry out an analysis of the company base in the low carbon heating and cooling and water supply and wastewater sectors in Scotland. The purpose of the study was to identify market opportunities arising from the global growth in demand for related goods, services and technologies and to assess the capabilities of firms in Scotland to exploit these opportunities.

The methodology involved an in-depth survey of SE and HIE relationship managed businesses in the water supply and wastewater and low carbon heating and cooling sectors and additional relevant non-relationship managed companies in the sectors.

The report found that companies in both the low carbon heating/cooling and water supply/wastewater sectors were very positive about their future growth prospects with over 90% predicting either growth or high growth, in the next three years. Construction, manufacturing and domestic were identified as the key markets for many of the companies but distinctive differences in the sales profiles of each sector were also identified, with low carbon heating/cooling companies having significantly higher sales levels in Scotland, and water supply/wastewater companies achieving higher international and rest of UK sales. It is suggested that water supply/wastewater companies have a much higher propensity to export than low carbon heating/cooling companies, highlighting the overseas reach of water supply/wastewater companies and to a certain extent, the current strength and growth of the Scottish and UK markets for low carbon heating/cooling products and services and the resultant focus on domestic markets by these firms. In terms of future export plans, it is found that low carbon heating/cooling companies appear to be more interested in developed markets which can afford low carbon alternatives, and where there are definite legislation drivers, while watersupply/wastewater companies are focusing on a range of markets due to the mix of technologies which are appropriate for all market types. The report identifies a number of factors which it is suggested are barriers to growth for companies (including market conditions, finance and public sector reluctance to embrace new technologies and approaches) as well as a range of opportunities (including deteriorating water supply/wastewater conditions in world markets and improved manufacturing costs making products more competitive in home markets, and the Renewable Heat Incentive and feed in tariffs).

The report makes recommendations around four themes, with the aim of supporting companies in terms of the identified barriers and opportunities, as well as their future support needs: finance – improve knowledge of and access to existing finance and funding mechanisms; focused business support – such as supply chain work, international trade missions, networking with other sector companies and groups, networking with potential customers and ‘meet the buyer’ style events; international trade sector focused initiatives - a sector-focused approach enabling the support organisation to build up an understanding of key export markets which can then be passed onto the companies from a position of knowledge and experience; and innovation and R&D – highlighting that sector-focused innovation groups have been proven in other areas of the UK to help companies develop products and services quicker and more effectively.