SWORD’S view is that a robust supply chain is fundamental to a healthy North Sea – and fundamental to Aberdeen long-term. But he is worried that the birth rate is now too low to enable the next generation of SME babies to come through and survive.
“We have the seeds of an E&P next generation, but I don’t see that on the supply chain side. For quite some time, we at 3i have asked where is the next Wood Group, Petrofac, Amec? Maybe we have some … PSN and RBG, for example.
“But what about the smaller end? Where is the next crop of new entrepreneurs. I’m not sure they exist. Who are the people that are building the next generation of service companies … creating technologies and products?
“Where’s the next Larry Kinch, for example?
“There are of course the Dreelan brothers. That’s a great story. They have identified market opportunities and built a top-quality business twice. We still have good examples of how people can start and build world-leading international oil service companies, but I’m not seeing enough coming forward at the early stage.
“This isn’t like the late-1990s, early-2000s, when there was money around.
“Today, there isn’t any money … fertiliser in the seed trough.
“Access to capital is a real challenge. It has traditionally been said that there’s always capital for good companies and ideas. That may still hold to a degree, but what concerns me is the speed at which this market has changed.”
Sword warns that the supply chain has not yet felt the impact of the oil-price crunch – but that it is coming.
He is in no doubt that firms will get squeezed, margins will shrink, contracts up for renewal will be for less, order books will reduce with lower margins and there will be job losses.
“It is not helped by the fact that some inefficiencies have crept in, and it could be a difficult 12 months for the supply chain. There’s probably going to have to be restructuring.”
Yet Sword agrees that this is happening against the background of the most phenomenal array of opportunities there has ever been.
He reckons, too, that a lot of those people who were interested in investing in the service sector will have got a shock and that they will hoard their money until better times.
“The supply chain will take a year anyway to shake it out,” Sword added.
“But when it’s over, I’m not sure we’re going to see much creation of new businesses. And I’m not sure we’re going to see as much M&A on the supply-chain side as in E&P.”
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