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BREXIT: The impact of Brexit on the UK oil and gas industry

Posted by Andy Norman on 28-Feb-2017 10:00:00

The impact of Brexit on the UK oil and gas industry

Who would have predicted what would proceed the results of the EU Referendum on the 23rd June 2016?

As political and cultural differences have come to the fore over the past six months, the one area that UK businesses have been able to agree on is by calling for the Government to make a ‘smooth transition’ from the European Union.

For the North Sea, in particular, facilitating this transition has never been so needed – especially as the maturing UK Continental Shelf (UKCS) continues to need investment at this critical juncture in its history.

Oil & Gas UK response

Responding to the ‘Leave’ vote by the UK public, trade association Oil & Gas UK were quick to reassure and respond to the industry the day after the vote, despite supporting the Government in wanting to remain in the EU. The statement on the 24th June read:

"We hope that all those involved will now come together and work constructively to make this transition as smooth as possible and we ask that the UK Government clearly outlines the process which will follow to minimise any potential period of uncertainty."

Fast forward six months, and there is evidence that the Government are making strides towards negating any period of uncertainty.

Government roundtable

In January 2017, the leading trade association for UK-registered companies working in the global energy industry, Energy Industries Council (EIC), hosted a roundtable event with Minister of State for Trade and Investment RH Greg Hands MP, and 12 senior level delegates from its member companies.

On the agenda were the challenges and opportunities that British suppliers to local and global energy sectors are facing. Here is a summary of the issues that were raised and discussed at the event, and how the Government is looking to positively react to the impact of Brexit.

1 – The industry’s ‘shopping list’

Amongst the wider discussion of exporting and funding, oil and gas industry delegates used the event to voice their shopping list of requirements for the Government to act on:

  • Continue with a clear relationship with the EU – Delegates want to keep the barrier-free relationships and access to the EU markets, with low or no tariffs at all. A migration system that enables business to retain EU workers and skills was also mentioned.
  • Protect investment – Delegates wanted a smooth transition of Article 50 to minimise disruption, to negate the potential problem of underinvestment in the UKCS and other key areas. There was also a call to protect access to the EU research and development innovation funding for UK firms.
  • Internal alignment – As well as a clear regulatory plan to facilitate the ease of trade, delegates wanted Governmental departments, such as the Department for International Trade (DIT), Her Majesty's Treasury, and Prime Minister’s Office - No.10, to be fully aligned and joined up for all of UK businesses, and not just the oil and gas industry.

2 – Funding still required

Concerns were raised by delegates about the balance of funding the DIT provides for inward investment activities, compared to exporting. Funding for trade events and envoys globally, in countries around the world for example, are needed to support the UK oil and gas industry.

The Minister’s response was to guarantee that the DIT would shift their attention more towards exporting, with extra support for the supply chain. This guarantee was extended further by the Minister agreeing to look into the validity of more funding for trade events, and to help promote the skills of trade envoys globally – a resource with a full range of services that is currently “underappreciated”, according to the Minister.

3 - Exporting is a priority

Greg Hands MP revealed at the roundtable event that the UK has the lowest percentage of exports of any EU country (27%) and that the Government has a responsibility to improve this figure considerably.

Delegates were keen to hear how the Government were focussed on securing a good deal for UK exporters in light of these statistics, as well as provide support to those firms who already have an overseas presence.

Other European countries “remain positive” about working with British firms, according to the Minister, who also revealed that UK companies investing in overseas were set to become a key focus for the Department for International Trade (DIT). While negative media coverage had not helped the cause, “the UK’s post-referendum economy is much stronger than anticipated.”

Next steps for the UK oil and gas industry

More roundtable events are set to happen between the EIC and Department for International Trade, to ensure the UK oil and gas industry continues to grow.

The event has helped to shed light on what the UK industry needs to do to thrive in the global economy. The UK industry only needs to look across the North Sea to witness the successful relationship Norway has created with the European Union. As Peter Searle, CEO of the world’s biggest oil and gas recruitment firms, Airswift, describes:

“Leaving the EU could ultimately signal a more prosperous future for the UK North Sea. Norway, a key player in the energy industry, already exists successfully outside of the EU and now it’s the UK’s time to carve out its own future.”

Claxton in the North Sea

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