Is the Green Deal a fair deal for SMEs?
The Green Deal is widely accepted as a progressive idea in principle. But, says Conor McGlone, criticism that the way the scheme has been designed could exclude small and medium sized businesses is damaging its credibility
Finally launched in January, the Government's highly anticipated retrofit energy-efficiency scheme has been positioned as a key mechanism in reaching its target of reducing UK greenhouse gas emissions by 80% by 2050.
However, already the scheme has been mired in accusations that it has been under-publicised, the interest rates are far too high and the process is overly complex, particularly for SMEs.
There are three stages to the Green Deal mechanism - initially, a Green Deal assessor visits customers to undertake an assessment of the property and make recommendations for energy-saving improvements. Authorised Green Deal providers provide finance and arrange for the installation of the agreed improvements and installers - who again must be approved - carry out the final work.
It seems clear that SMEs will struggle to provide finance as "providers". This is borne out by the current figures which show there are just 33 listed providers compared with 78 authorised assessors and 652 installers, the area that seems most suited to SMEs.*
However, the Department of Energy and Climate Change (DECC) says SMEs are "well-placed to join the new market" and it is not just big businesses such as Nationwide and Kingfisher that can play the role of provider, SMEs can be providers too.Yet the Federation of Master Builders' (FMB) CEO, Brian Berry, is more than sceptical of this claim.
"That's not quite true, in theory they can if they become a Green Deal provider, but the reality is that we don't know of any SMEs who have become a Green Deal provider. It is very disingenuous of the Government to say that, because in theory they can but in practice they won't - the requirements in terms of the financing and the insurance side of it make it prohibitive for local building companies to do that," he says.
"We've got 9,500 members across the UK and I am not aware of one of them becoming a Green Deal provider."
Furthermore, a recent FMB survey reveals that only 27% of SME construction firms are planning to get involved in the Green Deal at all - even as installers.
This has provoked Berry into claims that the Government risked turning a promising scheme into a "damp squib."
"The only way a local building company can get involved is by subcontracting to a Green Deal provider, or becoming part of a supply chain like British Gas - they just work for an energy company," he insists.
"Our big fear is that the big energy companies like British Gas will just gobble up the market for small builders."
This seems to be the worry for a number of organisations including the UK Green Building Council (UKGBC), which generally supports the Green Deal.
Its expert on the scheme, Policy and Campaigns Consultant and ex-DECC policy advisor Richard Griffiths, said given time, SMEs would get involved in the Green Deal. However, for Griffiths it was not a matter of whether SMEs would participate in the Green Deal, it was a question of how.
Speaking to SB, he says: "The only slightly unfortunate thing is that for the most part, [SMEs] are going to be in someone else's supply chain, rather than them necessarily having control over the process, so they might have limited control over what products they can use if they are installers and over what prices they can charge."
Berry is also worried that if SMEs do not get involved in the scheme, there is a risk that larger companies might eat into smaller firms' existing markets. Due to this, and despite Berry's misgivings, he recognises that it is vital SMEs do make their mark on the Green Deal.
"The Green Deal is an important means by which to tap into the retrofit market, so we do want SMEs to get involved - it's more work and we desperately need more work in the building industry. As it's set up at the moment it is difficult for SMEs to get involved unless they become part of the integrated supply chain and we'd like to see the Green Deal modified to open it up so that local builders can get more involved in the work," he says.
"What we need, and what we are working on is finding a cooperative or conduit."
Environmental and energy solutions company Parity Projects might offer just such a solution. It has come up with the idea of the Green Deal Conduit - a network of SMEs involved in the assessment and refurbishment of buildings throughout the UK and owned by its members.
Parity Projects managing director, Russell Smith, says: "There are many critics of the Green Deal, and most of them expect the Government to be dumping work in the industry's lap. The construction industry has always had a tendency to wait for work to come to it. In this case we have a new mechanism to drive change and the opportunity is really limited by our imaginations. The Green Deal Conduit has already captured the imaginations of many businesses around the country".
Smith said: "There are other options out there but they will mean that small companies are at the end of a supply chain and not in charge of it. The traditional route is not something that traditional contractors want to go down. Our opportunity is something small SMEs are going to design and own so we think not only will it be cheaper for them to get involved, it will be easier."
The conduit is backed by a range of professional institutions and trade associations which, combined, represent almost 100,000 SME and micro businesses in the UK. Some of the big names involved include the FMB, the National Federation of Builders (NFB) and Royal Institute of British Architects (RIBA).
The idea is for members of the Conduit to work independently but within a framework. Berry is hopeful that the Conduit can work, but admitted that Government funding was needed if it was to take off.
"We are trying to get funding for it because obviously its got quite a big upfront investment to get it off the ground, but it is still in a development stage and we're still committed to it because there is that huge market for retrofit and it would just be nice if the Government was a bit more supportive in a practical way to enable more SMEs to get involved."
*Correct at the time of going to press