Sir Ian Wood Urges Osborne to Act Over North Sea Oil Downturn
OIL industry veteran Sir Ian Wood has called on the Chancellor to take “drastic measures” to address the challenges facing the North Sea – as the company he transformed into a world leader in the field announced it had cut 8,000 jobs in the past year.
Aberdeen-based Wood Group also slashed contractors’ rates in a year that saw annual profits drop by 70 per cent to $138.6 million (£98.7 million).
Of the 8,000 jobs that were axed, 2,000 were in the UK.
Chief executive Robin Watson said the job losses were a natural consequence of the reduced number of contracts available to oil-sector service providers.
He said: “If we win or lose contracts our headcount flexes up and down. If you lose a contract obviously you do what you can to retain the staff but there is an ebb and flow through this type of business which is lost in the headline numbers.”
Earlier, Wood – former chief executive of the group – told BBC Radio Scotland that the Chancellor should cut the premium 30 per cent rate of corporation tax paid by the oil industry to the 20 per cent.
However, he said it was wrong to think that the North Sea oil industry was finished and guaranteed that it would return to strong activity within the next five years.
Wood acknowledged that the current downturn “is probably as tough as it gets”, after Oil and Gas UK (Oguk) warned on Tuesday that the rate of exploration for new reserves on the UK Continental Shelf (UKCS) was at an all-time low “with no sign of improving”.
In the foreword to its report, chief executive Deirdre Michie said: “We are an industry at the edge of a chasm.” She added that a “significant permanent reduction” in headline tax rates was required across the UKCS to attract investment back into the basin.
Offshore union Unite agreed with Wood and Oguk on the need for emergency tax measures. Tommy Campbell, the union’s regional officer, said the worst may be yet to come and tax breaks were needed to “give North Sea oil and gas production and the work-force a fighting chance for the future”.
He added: “Time and again we have warned the Government about the seriousness of what is happening but the responses so far have amounted to a sticking-plaster on a gaping wound. We’ve called for an offshore trade union-industry-government summit because the only viable way forward is to work in cooperation and push through the major challenges that are still in front of us.”
Aberdeen City Council’s finance convener Willie Young said it had tried to organise an oil summit, but had run into difficulties getting everyone together.
And he called for the Scottish Government to give more powers to Aberdeen – and Scotland’s other cities – to “incentivise” it to grow the local economy. “In Aberdeen … I get £115m in council tax which I collect, along with £215m in business rates, but that means I get a lesser grant of under £100m,” he said.
“The more I take in, the less grant I get, so there’s no incentive to grow the economy.”
A Scottish Government spokesman said: “Aberdeen City Council already has the power to reduce business rates. In contrast to England, and to the UK Government’s reform proposals, Scottish councils already retain all the rates income they collect.”
