Scotland’s energy sector is rarely out of the news. Accounting for up to 20% of our national GDP, the industry has a nationwide reach and its success or failure can have far-reaching consequences.
Here in Aberdeen, oil remains king. As citizens of the city, we feel its influence every day. Family, friends, neighbours, colleagues. We all have a connection – one way or another – to this global industry.
In recent years, the oil downturn has taken its toll with unemployment rising, shops closing and hotels struggling for survival. But we have finally started to turn a corner with a steadily rising oil price bringing hope that we could now be entering a sustained period of recovery and potentially even a return to growth.
There may be a collective sigh of relief at the positive market conditions we currently face, but a series of core challenges remain, including access to a skilled workforce.
Figures from Oil and Gas UK reveal the average age of an offshore worker in 2016 was 42.7 – up from 40.7 in 2014 and expected to continue rising in the next few years. Some of those who lost their jobs in the downturn have moved into other career fields or fully retired, while the new wave of talent has failed to materialise with businesses cutting back on graduate and apprentice in-take and many young people put off by such a prolonged period of uncertainty, or attracted to new industries like the booming tech sector and renewables.
So, where does this leave us? Well, we’re in something of a void right now. A positive uplift in market conditions has increased demand for labour, but there simply isn’t enough skilled talent available to meet requirements. Naturally, at this point, the industry looks overseas for people but another obstacle – this time Brexit – brings its own set of challenges, discouraging in-demand foreign workers who are worried about their long-term status in the UK. Oil and Gas UK claims more than 15% of offshore workers are non-British, with around half of those coming from within the EU.
Contractors have traditionally helped to fill gaps within the energy sector – helping businesses meet short-term demand while minimising their long-term risk and financial exposure. However changes in this field have also created new challenges and with new legislation for the taxation of off-payroll private sector workers expected shortly following a successful trial by HMRC in the public sector, there is likely to be sweeping changes made to the IR35 tax legislation, something which during the peak of the market became synonymous with oil and gas.
We’re facing a perfect storm. The industry is on the cusp of growth once again, but it’s being forced to fire-fight – struggling to meet demand and struggling to fill roles. During the boom years, a war for talent led to something of a gold rush. Workers could name their salary and commercial rents rose. Even hotel room rates in Aberdeen became the stuff of legend.
There’s only so much that individual businesses and operators can do to tackle the skills talent challenges. However, there are options available including making more of the Apprenticeship Levy. We need to collaborate and work with political leaders to find shared solutions to shared problems. A rising market can and should be good news for our city, our region and our country as a whole, but lessons from the past teach us that we need to carefully manage the return to growth and ensure that everyone benefits from a sustainable, long term strategy.
Heather Smallwood is an Aberdeen-based Director and Head of Global Mobility Taxes in Scotland at Grant Thornton UK
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