Industry body Subsea UK reported yesterday that this year would not be as grim as feared for the sector, but tough times will continue.
The study, supported by Scottish Enterprise and unveiled on the opening day of the OTC oil show in Houston, showed high levels of uncertainty which plagued the sector in 2009 had abated.
It is likely that 2010 will be more positive than many predicted this time last year, but the challenges are not over as the market is forecast to remain flat into 2011.
Subsea UK chief executive Alistair Birnie said: “The findings give cause for some relief. We are now in a much more stable environment.
“But it is clear that the order backlog, which has essentially acted as a buffer from the worst of the downturn, is drying up and to achieve growth we will have to rely on market forces.”
Mr Birnie has also called for more financial support from banks to help growth in Britain’s subsea sector.
Subsea UK commissioned a series of reports in 2009 to give companies a view of the market against a backdrop of a turbulent global economy.
The study compared actual quarterly earnings per share against what was forecast previously of 21 companies in the oil service sector with exposure to international subsea markets. The collective market capitalisation has now risen by 74% from the end of February 2009.
Mr Birnie said: “Of significant interest is that some companies have reported a reduction in turnover but an increase in profit. These companies have obviously used the downturn to take a strategic review of the business and drive efficiency to position themselves to be more competitive for the long haul.
“We will start to see some growth, but margins will remain tight. There will therefore be opportunities for growth among those companies who can demonstrate efficiency and innovation.”
Mr Birnie added that even those companies, particularly the smaller ones, would be unable to exploit the growth if the banks did not support them. He said: “Some smaller, more nimble businesses have continued to do relatively better this last year by working niche markets to their advantage. However, bank borrowing continues to be a major concern and we have seen a number of businesses struggle due to a lack of working capital.
“This is stifling growth when companies need to push hard to secure new orders. If not corrected quickly, it will undoubtedly impact on the industry’s competitiveness when the main growth phase re-emerges.”
Subsea UK is confident the British subsea sector is particularly well placed to exploit future growth.
It leads the way around the world, with 40,000 employees in 750 companies contributing £5billion annually to the economy.
The north-east has the biggest concentration of subsea firms in the UK.
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