More than 50,000 jobs in the engineering, construction and services sectors could be lost if chancellor Gordon Brown raises North Sea taxes in the Budget, the offshore industry warned this week.
The UK Offshore Operators’ Association said its members had indicated in a confidential survey that 34 developments planned over the next five years would be cancelled if there was any rise in taxation, and a further 83 would be put at risk.
These projects would sustain 40,000 to 50,000 jobs in engineering, construction and related services over the period, according to UKOOA’s estimates.
But, a UKOOA spokesman said the picture was ‘worse than that’ because cutbacks on operational expenditure would lead to the loss of several thousand more jobs.
He added that the figures in the survey returns were probably optimistic, given that the oil price had since fallen by $3 a barrel to an all-time low of $14 in real terms for the North Sea.
UKOOA stresses it is UK industry rather than multinational oil companies that will bear the brunt of any tinkering with the tax regime.
A study it commissioned from academics in Cambridge and Edinburgh showed that oil companies account for just 30,900 of the 381,800 employed directly and indirectly by the industry, while contractors and suppliers account for 219,000. The spokesman said it would be ‘far harder’ for these companies to move their assets (human and capital) elsewhere in the world in response to an increase in taxation.
‘What you’re actually going to do is hit the jobs in the construction and engineering firms,’ he said.
UKOOA said the fall in the oil price had removed any justification for a ‘windfall’ tax on the industry. Professor Alex Kemp at Aberdeen University had assessed the industry’s rate of return at $14 a barrel at 3 4%. Research by Sheffield University that suggested the industry was still making double-figure returns failed to take into account £900m of exploration expenditure.