Utilities industry business investment falls for second quarter running

Business investment in the utilities industry fell for a second consecutive quarter in Q3 2021, according to the latest ONS data, raising the possibility that the high price of gas could be having an impact.

Business investment by companies involved in electricity, gas and water fell 6.8% from £4.7bn in Q2 2021 to £4.4bn in Q3, ONS data analysed by business tax relief specialists Catax shows.

It does, however, represent a 12.3% increase in business investment compared to the same period in 2020. The price of gas started to surge in Q3 last year, caused by a spike in demand as economies emerged from lockdowns, depleted supplies as a result of a cold winter, and dormant weather conditions meaning wind power could not be relied upon. The industry’s quarterly performance is worse than UK industry as a whole, which registered a fall of 2.5% in business investment but it outperformed over the year, with the UK only managing a 2.6% annual rise. UK GDP increased by 1.1% in Q3 — leaving it just 1.5% below where it was pre-pandemic (Q4 2019). The ONS business investment statistics are an indication of ​​net capital expenditure by UK businesses, which includes spending on items such as plant and machinery, transport equipment, software and buildings.

 

Mark Tighe, CEO of business tax relief consultancy Catax, comments: “This second consecutive fall in business investment in the utilities sector suggests that the high cost of gas could be starting to have an impact on parts of the industry.

“Unfortunately high energy costs have persisted into 2022, and so there could be further falls in business investment on the cards.”

SourceCatax

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