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Business investment in utilities shrank 56.8% in Q2 due to pandemic

Image: Getty.

Image: Getty.

Business investment in UK utilities shrank by 56.8% in Q2 year on year, as the impact of the COVID-19 pandemic hit hard.

While investment slowed down throughout the economy at large, on average this fell by 26.1% in Q2 compared to the same period in 2019. As such, the utilities sector felt the impact significantly more than the wider economy.

Total business investment was down to just £1.7 billion according to the latest ONS figures, down from £3.9 billion in the second quarter of 2019 for the electricity, gas and water sectors.

Mark Tighe, CEO of tax relief consultancy Catax said that “this year has caught everyone off guard".

“The second quarter was when the pandemic really saw economies slamming on the brakes, with the national lockdown in the UK being announced on March 23, just before it began.

“The utilities sector has seen a much steeper decline in business investment than the economy overall, which is likely a result of the way these companies are more reliant on a complex network of physical assets. This would have left them more vulnerable to lockdown disruption than some other sectors.”

Analysis from Catax however showed that the picture was improving; while UK GDP shrank 20.4% in Q2, it grew by 8% in the three months to the end of August. This is raising hope of a steep recover in investment.

“It will take some time for business investment to climb back to where it was at the start of the year, when the only threat on the horizon appeared to be Brexit negotiations,” continued Tighe. “The speed of that recovery will depend very much on how long the second wave lasts and what disruption is to come.”

The impact of the COVID-19 pandemic and the lockdown has been felt throughout the energy sector, putting economic strains on utilities. For example, E.On has seen a €300 million (£271 million) adverse impact from the COVID-19 pandemic, split evenly between networks and its customer business.

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