Autumn Statement and Spending Review –
Oil & Gas UK Reaction

Following Chancellor George Osborne’s Autumn Statement and Spending Review, Mike Tholen, Oil & Gas UK’s economics director, commented: 

“Since the last Budget, the oil price has declined further, and we must continue to do as much as we can to help boost confidence and encourage investment in the UK Continental Shelf. If the oil price continues to be lower for longer, there is little doubt that alongside industry’s own concerted effort to improve its efficiency, we will need to work with Treasury on additional measures, including revisiting the current headline tax rate – consistent with the government’s commitment to the sector’s tax rate falling over time.

There is still much to play for in the UK’s North Sea – in terms of both barrels of oil and gas for the country, highly skilled jobs, and the security that comes with an indigenous energy supply.  The Office for Budget Responsibility (OBR) figures referenced in the Chancellors speech – noting a dramatic decline in  tax receipts – underscore the severity of the challenge ahead for the sector, but fail to take into account the indirect contribution this industry makes as a major employer, innovator and exporter of goods and services at home and abroad. In addition, Oil & Gas UK believes there is room for greater optimism, given the fact that production from the industry is likely to increase this year – for the first time in more than a decade – and is set to continue throughout the remainder of this decade.

It remains imperative we continue to work closely with the regulator – the Oil and Gas Authority, and HM Treasury to secure an enduring oil and gas industry for the UK. Recognising the increasing pressure on both government and industry to become more efficient, we need to cooperate more effectively to tackle the challenges ahead and maximise economic recovery from the UK Continental Shelf.

Looking to the future of the industry, Oil & Gas UK will seek clarity from the Government on its plans for a levy on all employers with a pay bill in excess of £3 million which could disproportionately impact oil and gas businesses, where costs are already under pressure, on two levels. Firstly, the levy is being applied on a payroll basis, so as an industry that supports highly skilled and highly paid jobs we will be disproportionately hit at a time of cost pressure.  Secondly, many oil and gas companies could face paying two statutory levies if they already pay the statutory levy to a training board.   It is not yet known how businesses based in Scotland will be able to claim back for apprentice training, nor the proportion of training costs than can be recouped, so Oil & Gas UK will seek more information from Scottish Ministers.”

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