28 March, 2024

The offshore crisis is beginning to bite

01 December, 2015

By Chris Buxton, director and CEO, the BFPA.


There is no doubt that despite reports of what is widely regarded as a slight muting of growth in UK manufacturing towards the end of Q3 2015, those companies relying upon the off-shore sector are feeling much greater pain as the effects of the low oil price begin to echo down the supply chain.

As the off-shore sector is the second most important industry to the BFPA Hydraulics membership, the current crisis in the off-shore industry is certainly very much on the Association’s radar with a number of BFPA and BFPDA members reporting difficult trading conditions. As we go into 2016 it is clear that we may have a challenging 12 months ahead of us.

It is telling that until recently, (according to Aberdeen City Council), Aberdeen and its surrounding ‘shire’, with a gross value added (GVA) of £31,753 per person, was the most economically productive region in the whole of the UK, outside inner London. Over the past decade, GVA has increased by almost 59 per cent in the region, compared with a rate of 35 per cent on average for the rest of the UK. They were even immune to the major downturn that we all suffered in 2008/9.

Now of-course, we are hearing that the industry has lost 65,000 jobs and discussions between ‘pundits’ at the recent ‘Off-shore Europe’ exhibition are suggesting that the oil price recovery may not be realised until 2020. Grim news indeed.

It would be stating the obvious to say that no amount of lobbying by either the BFPA or more pertinent ‘oil-industry trade associations’ like UK PIA can change the price of oil. However, it is worth re-visiting what it is that associations can and do try to influence. As an organisation involved in lobbying, the BFPA has to use its limited resources to try and target the things that they can influence and, as the well-known prayer states, have the wisdom to recognise the things that they can’t.

Leverage

By working with other trade associations with similar interests the BFPA can gain leverage from its contribution and to this extent it is becoming very active.

In lobbying terms, equally resource-strapped civil servants and vote-hungry politicians tend to listen to organisations that:

(a) speak on behalf of a large number of individuals (and by default, voters).

(b) speak coherently with one voice and a clear message; (so that they don’t send out any mixed messages).

(c) are realistic about what they are seeking, (no lobby group will fundamentally change ‘city-hall’).

(d) are prepared to state what they believe government should do about it (Governments have lots of problems – they need solutions and lobbyists are best equipped to offer them in their own sectors).

With this in-mind, the BFPA’s primary vehicle for lobbying is born of their membership of the Engineering & Machinery Alliance (EAMA) As members of EAMA, the BFPA is one of what is now thirteen trade associations representing 1900+ companies, mostly in mechanical and electronic engineering, with sales of £9+ billion into the main supply chains (including automotive, aerospace, food, medicine, pharmaceutical, defence, oil and gas, offshore wind etc.), providing equipment, components and services.

The work that they have been doing with this alliance is such that Government are now listening and they have also undertaken efforts to engage with Brussels to try and lobby ‘at-source’ on issues that will ultimately be transposed into UK regulation. We are also consulting with the CBI and have joined their trade association interest group which provides another channel (along with EAMA), into government. Through these bodies the BFPA can ensure that its voice is heard in all of the right Government quarters; most notably, BIS, Treasury and the Cabinet Office.

The kinds of issues on which they lobby, are not only the off-shore crisis, as this is almost too broad and tends to be met with rather dismissive responses along the lines of “What do you want us to do about it – we are in a free market economy…”, but on those numerous smaller issues that are a subset of the bigger problem and will help companies to cope with the fall-out of the crisis. Such issues include late payments, capital allowances, access to wider funding, help for exporting, the new mooted training levy and so on. Loss of skilled staff from the sector is a very significant problem.

Significant resource

The BFPA has been instrumental in promoting and supporting the Talent Retention Scheme or TRS, born out of BIS under Vince Cable before he lost his seat. Its purpose is to provide an industry-led and sector-focused programme through which to facilitate the deployment and retention of key engineering skills across the UK. It is a significant resource for the supply chain in which the BFPA operates and supports large, medium and small company interests.

Through EAMA, the BFPA is also now regularly invited to make a submission to the Chancellor who is currently under pressure to deliver a package of tax cuts and incentives such as directly funding exploration work in the North Sea when he presents his final budget of the current Government in March. The BFPA has joined other trade associations in reminding him that around 450,000 jobs are directly supported in the UK through the oil and gas industry, which is obviously centred in the North East of Scotland around Aberdeen.

We can only hope that he listens as there is no doubt that the off-shore crisis is now ‘beginning to bite’ and it has painfully sharp teeth.




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