As businesses contend with rising bills, difficulties with recruitment and dwindling orders, 51% of Aberdeen firms project reduced profits in 2025.
The last time businesses in the region projected figures like this was in 2020 when the same percentage of respondents to Aberdeen and Grampian Chamber of Commerce’s (AGCC) Quarterly Economic Survey forecasted reduced profits in the fourth quarter.
The north-east of Scotland is shaping up worse than the rest of the UK as 32% of UK businesses forecast a dip in profits this year.
Speaking at a launch event for the report, AGCC research and insights manager Sarah McColl explained that the issues facing oil and gas firms have wider-reaching impacts than the energy market.
McColl said: “It’s interesting when you look at the open-ended questions that the number of businesses that aren’t oil and gas or energy-related that do reference the issues that industry has and the compounding effect that has on all the other pressures.
“Even when we look at the hospitality example, they used to rely quite heavily on the oil and gas industry to fill rooms during the week and things and that’s not the case anymore.”
Optimism remained low for the year ahead as 29% of firms said that they expect turnover to get worse.
Headcount at Aberdeen firms to stagnate
This comes as BP (LON:BP) announced a cost cutting drive that will see the supermajor cut over 5% of its workforce as 4,700 employees are set to lose their jobs alongside 3,000 contractors.
The London-listed supermajor is looking to cut costs by $2 billion (£1.64bn) as it sets out on a redundancy process that an industry analyst said would likely impact the north-east of Scotland.
On Monday, oil and gas supply chain firm Hunting (LON:HTG) also announced a restructuring campaign that will impact seven sites across the UK, the Netherlands, Norway, Saudi Arabia, and the UAE.
The firm employs around 200 people across its three UK sites. Hunting operates a base in Altens, known as Badentoy, as well as the Scottish village of Fordoun and its corporate headquarters in London. Hunting expects to share details on how these sites will be impacted during its full year results which will be published in March.
Russell Borthwick, chief executive of AGCC, said: “The Labour government came to power promising to grow the economy and be a friend of business.
“Six months in, the reality is feeling very different for firms across the UK, and many of the challenges appear to be magnified for companies operating in the north-east of Scotland.
“The results of this survey – which is the first opportunity for our membership to pass judgment on the new government – are a damning indictment of policies being pursued on energy, employment, and tax.”
Recruitment is also looking bleak for the region that is set to play host to GB Energy’s headquarters as 61% of firms said headcount is likely to remain the same over the next three months.
Over the same period, 22% of businesses in the Granite City said that they expect employment numbers to fall.
Late last year EY ITEM Club’s Scottish Autumn Forecast report outlined that Aberdeen lost nearly 18,000 jobs between 2023 and 2010.
The report explained: “Aberdeen is one of the few local authority districts in Scotland to have fewer jobs in 2023 than in 2010.”
North-east spending stalls
Findlay Anderson, a partner at law firm Gilson Gray, added: “Only 27% of north-east companies are projecting profit growth in the next quarter – a four-year low that compares unfavourably to the 40% of UK respondents anticipating profit increases.
“More than half of respondents in our region expect profitability to decline during this period, compared to less than a third across the UK.
“For some time, we have been forecasting the negative impacts of successive governments’ policies and taxation on the North-east’s oil and gas industry. Over the past few quarters, this has translated into a gradual but undeniable decline in local business economic confidence.”
This comes as over half of firms reported that investment in machinery and equipment will remain the same throughout the first quarter of 2025.
However, this is slightly more optimistic than the UK figure as 5% more firms reported no extra spending.
AGCC outlines plans for 2025
Borthwick concluded the event by drawing attention to the Energy Transition Taskforce, which aims to support a just transition for offshore workers and firms operating in UK waters.
This week, the group chaired by Philip Rycroft, a former permanent secretary in the UK government, met for the first time.
The chamber boss also pointed towards the news that state-owned energy firm GB Energy is gearing up to open its HQ in the Granite City as he laid out plans to establish a Bank of England-like body for energy policy.
Borthwick added: “If the economy is important enough to have an independent body which sits above the government of the day, setting fiscal and economic policy – the Bank of England – why do we not have the same for energy?
“The Taskforce is starting to explore that opportunity so we’re actually trying to do something about the problems that we were outlining.”