Waste drives green spending but capital investment slips further

UK industry spent £3.4 billion on environmental protection in 2003, according to new figures from the Environment Department (DEFRA).1 Capital expenditure continued to decline, to 15% of total spending, while waste management was the fastest-growing component of operating expenditure. The chemicals industry was the biggest green spender.

On behalf of DEFRA, consultant URS analysed 1,500 questionnaires returned by companies in the extractive, manufacturing and energy supply industries and extrapolated figures to estimate spending across the sector. Similar surveys have been carried out annually since 1997, but DEFRA warned that figures cannot be directly compared because of changes in the data gathering and the wide confidence intervals.

With that caveat, DEFRA noted that spending estimates had declined year by year, from £4.3 billion in 2000 to £3.9 billion in 2001 and £2.6 billion in 2002.

DEFRA said "a reduction in spending might have been expected as a result of the general downturn in the manufacturing sector over the period", but suggested the 2002 figure was "a bit of an anomaly". That year did see a short term reduction in industrial output.

In percentage terms, capital expenditure continued to decline in 2003 to just 15%, compared with 34% in 2000. Although part of this reduction was attributed to a change in the questionnaire in 2002, capital spending on integrated pollution control measures has fallen in every year of the survey.

The highest proportion of capital spending was on air quality. DEFRA suggested this could be due to additional spending on measures to meet integrated pollution prevention and control (IPPC) regulations, which are being introduced for existing installations on a sector-by-sector basis to 2007.

Since 2000, the operating proportion of expenditure has grown from 66% to 85%. The highest spending area was solid waste, which has been taking an increasing proportion of green spending over the four years of the survey. In 2003 it accounted for about 46% of the total, up from 35% four years earlier.

One possible explanation for the apparent growth in waste management operational expenditure is that companies are taking greater care to account for such costs. Landfill tax increases will also have had an impact.

Air quality has been taking less of the operational budget over the period, falling to around 8%. The second-largest source, wastewater, has also fallen, to 27%.

Merlin Hyman of the Environmental Industries Commission confirmed that industrial air pollution was one sector where his members had seen a market slowdown. Third party suppliers saw their receipts recover from a slow year in 2002, but their market share slipped as companies funded in-house operations.

Mr Hyman said the picture was complex. "They are useful figures and they show how much money the UK is spending but some sectors are doing well, like consulting, water and contaminated land, while others are suffering."

Chemicals was the largest-spending sector in 2003 at £610 million. Food, drink and tobacco and the power sector were among the largest spenders - at £410 million and £470 million, respectively - but both had reduced their expenditure since 2002. In contrast machinery and equipment and textiles, clothing and leather increased their spending.

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