Offshore focus in Budget 2015
Yesterday, the Chancellor delivered his last Budget of the current Parliament and it’s clear we were right to predict that onshore oil and gas would take a back seat this time around. Here’s a round-up of what some commentators have been saying.
Dan Lewis, Senior Infrastructure Policy Adviser, Institute of Directors
“The UK can’t afford to be without the North Sea oil and gas industry. So cutting the Supplementary Charge from 30 to 20% and reducing Petroleum Revenue tax from 50 to 35% is the right thing to do. However, given the great uncertainty in the global energy market, and with the possibility of further oil price falls, a future government may have to look at cutting these taxes again.”
Energy Desk (Greenpeace)
“The UK still-nascent shale gas sector – for so long the energy apple of the coalition’s eye – didn’t get a look in during Osborne’s big speech. The word ‘shale’ was used just once in the budget document, despite Scotland announcing a fracking moratorium earlier this year, and the Welsh National Assembly opposing operations in their country. It’s safe to assume, what with the delay of the 14th licensing round announcements till after the election, that fracking is not viewed as a vote winner; it’s still very much part of the government’s plans though.”
Malcolm Webb, chief executive of Oil & Gas UK
“The announcement laid the foundations for the regeneration of the North Sea. The industry itself must now build on this by delivering the cost and efficiency improvements required to secure its competitiveness.”
John Cridland, Director-General at the CBI
“The oil and gas industry, which supports 450,000 UK jobs and is a major contributor to GDP, has been given a much needed boost with the reduction to the Supplementary Charge and other incentives. This will help address concerns over job losses and investment freezes, but pressures remain due to low oil prices.”
John Longworth, Director General at the British Chambers of Commerce
“The offshore oil and gas sector makes a significant contribution to the UK economy. However, the sector is facing a number of challenges as a result of the recent fall in oil prices and tax increases introduced earlier in this Parliament. If the sector is to attract the necessary investment in the years ahead, we must have a competitive and stable tax regime. The Chancellor was correct to use the Budget to introduce measures to support the industry.”
What’s our analysis?
It looks like we were right to predict that the offshore oil and gas industry would targeted for support in the last Budget of this Parliament, and that onshore energy extraction would be unlikely to feature.
Supply chain SMEs will nonetheless be disappointed not to receive any specific support to create the conditions for them to thrive alongside a developing onshore industry.
Other measures aimed at supporting SMEs more broadly will no doubt be welcomed.
The real gem in yesterday’s Budget Statement, though, is the announcement that a new Enterprise Zone will be created in Blackpool. This could pave the way for British SMEs to form a support hub from which to service shale gas operations in the Bowland Basin, with existing supply chain businesses relocating to Blackpool wholesale or simply establishing satellite operations there. Either way, it puts Blackpool in a strong position to attract investment and create jobs, and is a move welcomed by the OESG and supply chain SMEs.
For a wider understanding of yesterday’s Budget Statement, see this FTI Consulting Snapshot Budget 2015.