Government plans to “decimate” the UK oil and gas industry risks destroying many more jobs than those of energy workers.
This was the warning issued by marketing and PR agency boss Zoe Ogilvie who warned that “time is running out” to prevent the wider impact on jobs caused by the UK government’s energy industry fiscal policies.
Ogilvie argued industry estimates that warned close to 35,000 jobs would be at risk between 2025 and 2029 fell short, and there would be “much more” among industries on “the periphery of oil and gas” such as her own business.
She said energy firms account for 75% of Big Partnership’s Aberdeen office and said this would be the same for many services firms.
Posting on LinkedIn she said: “There is no energy transition without oil and gas and certainly not a ‘just’ one. The opportunities in renewables simply don’t exist at scale (yet) to redeploy 35,000 people. So if we decimate oil and gas, we decimate the lives and livelihoods of much more than 35,000 people,” she said.
It is no secret that Aberdeen’s economy leans heavily on the oil and gas industry.
As a result of this, it comes as no shock that north-east business owners who work with oil and gas firms have shared concern.
The impact of oil and gas on the north-east of Scotland
OEUK recently estimated that the UK government’s plans to raise the windfall tax on North Sea oil and gas firms could cause a £13 billion hit to the UK economy and destroy 35,000 jobs.
In June the trade body estimated that more than 200,000 livelihoods depend on the sector across the UK in direct, indirect jobs such as those supported in professional services firms working with industry to induced jobs such as those provided by sandwich shops
This prompted analysts at Stifel to estimate a collapse in investment prompted by the Energy Profits Levy would cut this number in half, causing 100,000 job losses.
It is not just firms such as Ogilvie’s that stand to lose out. North-east-based estate agent and law firm Aberdein Considine also voiced concerns.
© Supplied by DCTThe firm’s partner and head of energy, Rod Hutchison, said: “There’s no getting away from the fact that the oil and gas industry continues to play a major role in the wider economy of the north-east of Scotland.
“Its reach spreads from professional services to hospitality and everything in between. It also makes a valuable contribution to our arts and third sector organisations.”
He highlighted the fact that Aberdeen has “weathered the storms over the decades due to the volatility of commodity prices, geopolitical events and fiscal changes,” however, current decisions may bring about “the premature demise” of a sector that so many rely on.
He added: “We’re now at a very tricky crossroads where some wish to see the premature demise of an industry which, let’s be clear, has greatly improved our quality of life over the years and, more importantly, kept the lights on, before there is a reliable replacement at the scale necessary to deliver energy security, affordability and to redeploy the people whose jobs are on the line.”
Quantifying the risk
OEUK’s Economy and People report said that 120,000 of the 200,000 jobs were directly or indirectly in oil and gas and more than 80,000 were “induced in communities.”
It said: “The sector supports around 1% of the value of the UK economy and 1 in every 160 of its jobs.
“This contribution is significantly higher in certain parts of the UK. For example, in Scotland, the industry is estimated to support around 1 in 30 jobs.”
This OEUK analysis was supported by Fraser of Allander which wrote in June: “From our models of UK and Scottish induced jobs, it would suggest that 90,000 jobs are induced in the UK as a whole.”
The University of Strathclyde institute explained that in Scotland, “depending on how you allocate induced jobs,” the country accounts for between 8,000 and 26,000 of these jobs.
Hospitality takes a hit as GDP falls
© DCT MediaDuring a recent appearance in Aberdeen, Fraser of Allander’s professor Mairi Spowage highlighted how Aberdeen’s gross domestic product (GDP) has been impacted over the last ten years.
She explained that while Aberdeen and Aberdeenshire’s GDP is 20% higher than Scotland’s average, this figure used to be 50% a decade ago.
Spowage said: “The GDP of the region has contracted by 18% and that’s compared to a Scottish growth of 14%, that’s over the last nine or 10 years.”
She added the caveat that over the pandemic hit during the last decade which will skew figures slightly.
“If you look at sectors which are likely to be in the supply chain of the energy sector, including what’s supported by people’s wage spending” she continued.
“The hospitality sector in Aberdeen has contracted by 25% over the last 10 years.”
Spowage explained that hospitality has taken a hit nation-wide over the last decade, however, “It’s hugely more impacted by this overall fall in economic activity” in the north-east.
Will GB Energy make a difference?
© Supplied by AGCCSpeaking at a breakfast event hosted by Aberdeen and Grampian Chamber of Commerce (AGCC), she warned that jobs in the region will continue to decline, it just “depends how fast”, unless new energy technology investment replaces jobs lost in the energy supply chain.
When asked if the UK government’s £8.3 billion for GB Energy, which most now are expecting will be based in Aberdeen, would have sufficient fire power to maintain jobs and investment in the sector, she said:
“They are hoping that with this sort of public investment that it is not just the money, it’s the signal it gives, the certainty it brings and it is the private sector investment it can leverage.
“The sorts of estimates you hear about the multiples you can get from public sector investment, sometimes I am quite sceptical.
“These things all have to be pointing in the same direction for it to be as successful as possible – it’s not a huge amount of money in the scheme of things, it’s true. But it can be used badly and it can be used well.”
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