UK oil and gas supply chain sees diversification boost into non-energy sectors due to market uncertainty and COVID-19

In the face of continued market uncertainty, low oil and gas prices and COVID-19, compounded by very tight margins and fierce competition, many businesses are diversifying into non-energy sectors, finds a new report by the Energy Industries Council (EIC).

This year, EIC’s Survive and Thrive Insight report (Volume IV) which provides invaluable first-hand information from the UK supply chain from 40 representative energy businesses, details the eleven growth strategies employed to grow their businesses during a market crisis. The research shows 49% chose diversification, specifically de-risking their revenues to rely less on oil & gas, as their most used growth strategy.

Although 90% of companies interviewed were active still in oil & gas, with 26% having already diversified into renewables, the report highlighted 72% of businesses diversified into non-energy sectors such as infrastructure, industrial and pharmaceuticals.

Only 18% of business leaders chose to fully embrace the Energy Transition even though it is expected to create many diversification opportunities for the supply chain in future years. It’s quite clear from the research business leaders are still in the stage of learning the language of energy transition, and the vast majority are not yet able to convert this growing interest into contracts and wins.

For the fourth year running EIC member companies surveyed still perceive developing new export markets as their riskiest growth strategy with the slowest return to profit, preferring to adopt alternative growth strategies such as diversification, services and solutions and optimisation.

EIC CEO Stuart Broadley commented: “It is always inspiring to speak to entrepreneurial business leaders about how they develop amazing new strategies to grow in challenging markets. Arguably, today’s conditions are the most challenging we have ever seen, but this research shows that businesses are already adapting and are relatively resilient to this uncertainty.

“Although businesses expect tough times ahead, leaders are investing in business development, R&D and their people throughout, and see diversification and innovation as key to survival in the short term, with many still seeing growth and new opportunities.”

Other key findings and recommendations in 2020 include:

• Only 15% of companies exported their way out of a crisis
• 39% of companies optimised to grow their business
• 46% of companies were SMEs
• 54% of companies adopted an innovation strategy including technology and digital
• Companies should start adapting and stop waiting for COVID-19 to end and plan new business process now

Read the latest issue of the OGV Energy magazine HERE.