As a financial services provider to both UK Small and Medium Enterprises (SMEs)1 and commercial landlords, Barclays sees first-hand where some of the major barriers and enablers are holding back investment in energy efficiency improvements to business premises.
The built environment contributes significantly to the UK’s carbon footprint, accounting for 25% of emissions2. Commercial premises are a key contributor, estimated to represent nearly a quarter (23%) of built environment carbon emissions3, the majority of which (where data exist) are occupied by SMEs with less than 250 employees4.
Given that 56% of UK commercial property is estimated to be tenanted5, SMEs are also likely to be tenants rather than the owners, which can impact their ability to make material changes to the premises under their lease agreement.
Combining a review of Barclays’ insights from previous market research with new quantitative data from the Barclays Business Prosperity Index survey, Barclays has identified four key insights which shed light on the causes of the UK’s slow progress to date, including cost barriers and data availability.
To drive faster progress in reducing built environment emissions, Barclays has used these insights to inform six policy recommendations to the UK Government, each designed to incentivise investment in energy efficiency improvements to SME business premises.
Key insights
Policy recommendations
Barclays makes six recommendations to the UK Government, outlining how public policy can be used to incentivise more SMEs and commercial property owners to invest in energy efficiency improvements to their business premises.
Streamline and promote the SME environmental grants landscape
To drive awareness and take up of grants, the UK Government should consolidate existing schemes into a streamlined offering, creating a single point of entry which should be actively marketed.
Re-introduce capital allowance incentives
To encourage businesses and landlords to invest in energy efficient solutions for buildings, the government should re-consider its decision to remove targeted capital allowance incentives. Barclays would strongly support the re-introduction of a super-deduction applied to technologies and equipment on the Energy Technology List and Water Technology List.
Improve energy performance measurement and reporting
To ensure that the energy performance of all buildings – regardless of purpose – can be assessed using high quality, understandable and comparable data, the government should seek to conclude its consultation on the Energy Performance of Buildings regime at pace. Critically, this should review the metrics for commercial buildings in tandem with those for residential buildings.
Mandate data sharing
To improve understanding of building performance and appetite for energy efficiency improvements, the government should mandate the sharing of energy consumption data between commercial real estate tenants and building owners.
Raise energy efficiency standards
The government should confirm the raising of the minimum standard under the Minimum Energy Efficiency Standard for privately rented non-domestic properties to EPC B by an agreed and appropriate deadline (including any necessary interim steps).
Green leases
The government should consider putting more regulatory weight behind the use of green leases – potentially mandating that all commercial premises leases include some basic clauses in this respect (such as data sharing permissions, or landlord rights of access for energy efficiency improvements) by an agreed deadline.
Barclays’ Group Policy Development team creates public policy thought leadership content on behalf of Barclays. Our work draws on the bank’s expertise, data and insights, and is intended to inform the design and application of public policy solutions in response to pressing economic and societal challenges.
Footnotes:
1 Small and Medium Enterprises (SMEs) are defined here as those with less than 250 full time employees, or an annual turnover of less than £6.5m.
2 UK Green Building Council, Climate Change Mitigation, accessed October 2024.
3 UK Green Building Council, Commercial Retrofit, accessed October 2024.
4 While business size data is missing for most non-domestic premises reporting in England and Wales, where it does exist it is clear that the majority of non-domestic building occupants are SMEs with <250 employees. HM Government, The Non-Domestic National Energy Efficiency Data-Framework 2024 (England and Wales), August 2024. Contains public sector information licensed under the Open Government Licence v3.0.
5 British Property Federation, Energy Data, Buildings and Net Zero. Closing the Data Deficit, June 2024.