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Government policy change makes this heat pump company a buy

Rated on a PE ratio of six and on less than half analysts’ target prices, this share offers recovery potential
August 31, 2023

Clear guidance on government policy is a prerequisite for businesses. That’s because it impacts investment decisions and the purchasing activity of customers. Any policy change should therefore be enacted in a way that minimises disruption. This is not always the case.

The UK government has unexpectedly announced its intention to change the legislation that governs development in nitrate-sensitive areas with no prior consultation and without releasing details of how the new scheme will work. Since 2017, developers have been required to ensure new developments do not cause increased nitrate emissions into the local environment. Many have done so by installing control flow technology in homes, which reduces nitrate emissions by cutting the amount of water used.

However, through the levelling-up and regeneration bill, the UK government plans to remove this obligation on developers and replace it with an enlarged mitigation programme through The Department for Environment, Food and Rural Affairs’ natural England nutrient mitigation scheme. It is based on the generation of nutrient neutrality credits that are created by projects and then purchased by developers to offset the emissions from the new construction.

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