Investment in Cleantech in the UK

Alastair Paterson our consultant managing the role

With ambitious carbon and environmental targets to reach, clean technology (Cleantech) continues to play an increasingly crucial role in shaping our future. This type of technology can be classified as any process, service or product that decreases our dependency on unsustainable alternatives. For example, Cleantech may be focused on delivering more efficient systems for the transportation of goods around the globe. 

A recent study by Cleantech UK offers a detailed insight into the changing landscape of investment in clean technology across the UK. The study was compiled by surveying more than 70 leading actors in the UK’s Cleantech space, reviewing critical academic and industry papers and accessing key data from the area. We explored these findings to see what they might mean for the industry and those pursuing careers in the Cleantech space. 

UK investment in Cleantech

The report highlights the ongoing success of Cleantech, especially when it comes to UK investment. Stating that Cleantech outperformed VC investment trends in 2022. This was achieved via both national and international investments in the area. Yet it is clear that more investment will be required to make Cleantech a viable replacement for other technologies. 

Specifically, the study points to the need for larger funds in order to scale up and test new technologies on a realistic scale. Other key challenges in the investment area include shifting the focus of development from London, Oxford and Cambridge in order to develop better connectivity in the ecosystem. 

Although the size of investment in UK Cleantech has increased year-on-year from 2018 to 2022, the number of deals has decreased. This shows how investments are being made on a larger scale, likely on more developed Cleantech solutions. 

UK investment in Cleantech by sector

The Cleantech report highlights some interesting findings with regard to investment in various clean technology sectors. Unsurprisingly, energy and power remain the most heavily invested sector. Yet its percentage share of overall investments in Cleantech actually shrank from 2020 to 2022, now making up 24% of all investments. Materials and chemicals also saw a drop in investment between 2021 and 2022, but remain a major area of VC focus. 

In contrast, resources & the environment and transportation & logistics have seen a healthy uptick in investment from 2020 to 2022. These areas now make up 21% and 13% of total investment in Cleantech respectively. The report also shows that the majority of serial investors are focused on Seed and Series A investments. 

Realising opportunities and navigating challenges

Technology transfer is highlighted as a major untapped opportunity in the Cleantech space. The report highlights concern over the centralised nature of technology development in Oxford, Cambridge and London. This focus means that many start-up companies are unable to afford access to the required lab space. Agricultural start-ups are especially impacted by this, as there is often a requirement for barn space, which is very difficult to come by. 

Although investments are identified as being at a reasonable level, it is clear that more is required both in terms of investment amount and investment spread in order to make many Cleantech solutions viable options. For example, only Kiko Ventures made 3+ investments in Series B projects in the UK in 2020-22, highlighting a huge gap in funding projects which are later in their development. 

How can the UK maintain a competitive advantage?

Investment in UK Cleantech remained strong in 2022. This is positive news when compared to the Unites States’ 24% and EU’s 16% decrease in investment. Yet overall investment in UK Cleantech remains small when compared to the US, EU and China. In addition, new incentives such as the U.S. Inflation Reduction Act and the EU‘s Green Deal Industrial Plan will likely see investments in Cleantech increase in the coming years. 

To remain competitive, the UK needs to adopt a robust strategy for Cleantech investment. The report suggests that this should happen in 4 steps: 

  1. Improving commercialisation of new innovations by funding de-risking of solutions and securing demand 
  2. Introduce long-term policy signals and regulations to improve investor confidence
  3. Develop better synergies between different parts of the Cleantech ecosystem both domestically and commercially
  4. Further develop the UK cleantech ecosystem including customers, suppliers, infrastructure, and logistics 

Find your next job with Marks Sattin

It is clear that the UK Cleantech space is an exciting area which is set to grow in investment in the coming years. There are countless opportunities for professionals looking to break into this area and make a positive impact. Here at Marks Sattin, we have some fantastic job roles available in fintech. Alternatively, if you are looking to hire the best in the industry for your business, you can submit a brief now

21/03/23
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