Supply chain capability and the true cost of uncertainty

Since 2024, EIC has consistently lobbied for stability, but stability across all areas – across policy, a stable long-term project pipeline, stability in our global trade links and in our finance models.

Policy is shifting because in many regions – the UK, the US, New Zealand, Europe – the political system has allowed for large swings between parties, which results in swings in which energy systems are in or out. What EIC has asked for, and where we are not yet at with any region, is a clear project pipeline that works backwards, that is elevated above political manifestos and whims – but which sets long-term goals and understands the integrated nature of grid planning, of ‘the one supply chain’, and takes energy out of silos and puts the jigsaw together. Without it, we see one term courting one energy technology; power changes hands; we see a 180˚ in priorities and favoured technologies; and businesses who have invested and planned for A are now dealing with Z. The gap can, and has been, that wide.

With a plan such as this, business could move forward with confidence, investors would see return on investment and know how the pieces fit together. We can talk supply and demand together, not one at a time. And let’s not be too hard here – this is hard to achieve in among many other competing demands. But it does need to be done.

Having a three to five-year business strategy that straddles a political shift is not easy, nor is it sustainable.

And the reason EIC has been asking for a long-term energy plan? It is so that there is a sense of reliability in the work. We have government strategies, plans and objectives – all headline statements – but not much in the way of backing that up with a clear pipeline of which projects, when and where to hit those targets. No country or region has this yet.

We see statements made and then delayed. We see money put into technologies and then years of wrangling with the other policy areas – planning, skills and so on – to get them off the ground.

Stable countries and regions, and those moving forward at pace, are attracting the supply chain – and they are keeping it

Once work starts coming around to be re-bid for, as our Bankable Energies Report showed, front end engineering design (FEED) fatigue is a major issue. If projects are constantly in FEED stage but do not reach final investment decision, and then are paused just to be brought back, our members find themselves having to re-bid for the work at years-old prices. And once a project is pushed out, the risk profile to investors increases – it does not matter why it was delayed, the fact that it was is enough. That will spook investors, and that will delay the project more as investors are sought, and then the supply chain no longer has a project to tender for... and then the politics changes. And then there is no project for the next nine months. Then it starts again.

This uncertainty in the pipeline is also having an impact on the workforce. Without projects to work on, companies are ‘streamlining’ resources, redeploying expertise and looking at how to proceed. We saw companies move the workforce to where the opportunities were. Recently this has been the Middle East, but now this once-stable market has become uncertain. We used to rely on the fact that if companies sent out workers, they would return to their ‘home’ country when the work came online, but this isn’t the case now.

What we see is that stable countries and regions, and those moving forward at pace, are attracting the supply chain – and they are keeping it.

What does this really mean for supply chain capability?

This volatility in policy and long-term planning directly threatens a national company’s ability to grow in-country. For an organisation to seed and root in the country in which it was formed, it needs certainty in where it is going and an ability to pick up work. This certainty is required in order to plan development and attract business.

Without this stability, we see companies in these unstable regions become hollowed out. Yes, they maintain a ‘local’ presence, but the growth is happening overseas. Great for the company, not great for domestic capability when it will inevitably be required. In fact, in the UK, we typically see more international companies bid for work more cheaply than those in the UK can.

Companies are doing this, and they aren’t quiet about it. We regularly hear that they are making the choice to redirect investment overseas because it is more stable. With the US and the UK leading the way in this refocus, other regions are not immune.

Conversely, those countries providing stable policy at pace and a clear timeline of project development, or those understanding that energy isn’t a binary choice, are attracting more capability and expertise. This provides a base level that these regions can lean on and grow into, helping them capture the market. Those countries who are not doing this are at risk of impeding their own objectives.

By Rebecca Groundwater, global Head of External Affairs, EIC UK