Tumbling oil prices could lead to industry workers plugging the skills shortage gap by switching to sectors struggling to find key workers, the CBI’s director of economics has suggested.
The crisis within the oil and gas sector has deepened as the price of Brent crude – the North Sea benchmark – dropped to a six-year low of $47.10 per barrel.
The turmoil has led to the closure of oil field services firm Archer’s Blyth base and confirmation that subsea firm Flexlife was reviewing its Gateshead operations. Meanwhile, Darlington-based subsea engineering specialists DeepOcean also expects jobs to be lost as part of a company reorganisation.
However, the CBI’s director of economics Rain Newton-Smith, who took up her post in August, said the oil price crisis will create business winners as well as losers in the UK and global economy, on top of the householders welcoming falling prices at the petrol pumps.
Mrs Newton-Smith’s comments came as she visited the North East for the first time in her new role, on a whistlestop tour of Newcastle, taking in a breakfast briefing event hosted by Barclays.
She said: “We have seen oil prices reach $115 a barrel in June and now they are below $50 and that will create some winners and losers in the UK economy.
“I think for businesses in the UK, figuring out what that means for our supply chains, for our households, is difficult.
“Householders are seeing more benefit with more money in their pocket after they fill up at the pumps and certainly some businesses will see quite a big benefit that will take some time to filter through, in terms of lower input costs.
“But it’s going to have a big impact on our oil and gas sector. A lot of producers in the UK and globally will find it hard to be competitive with prices around $50 a barrel, so it will undoubtedly have a knock-on on some of the related sectors.
“If oil prices stay where they are for a sustained period of time that’s undoubtedly going to put pressure on some of the oil and gas producers. I think one thing that is positive is that it will provide a boost to some households and businesses in other sectors.
“There are hopefully opportunities for some of the skilled people to move to some of the other sectors. When we talk to our companies one of the themes that comes out strongly is the shortage of engineers, a shortage of skilled workers.
“And in some sense if that helps to alleviate some of the skilled shortages we see in other sectors we could see it maybe put us in a better position to ramp up production in some of the high value manufacturing that we want to see, and improve our overall trade balance as well.”
The idea of helping to rebalance the overall UK economy may not bring comfort to North East oil and gas workers potentially facing a shift in career, but the skills are transferable, the CBI believes.
Dianne Sharp, CBI North East regional director, added: “It’s companies in this region talking about the shortage of engineers and over the last 12-18 months companies have complained of the ‘brain drain’ to the oil and gas sector, saying they can’t compete because of the high salaries within that sector.
“I think maintenance engineers, general engineers, these are skills that can and will be picked up by the other sectors, and in this region.”
In general terms, Mrs Newton-Smith said the UK has much to celebrate, as a leading light in the current international gloom.
She added: “Some of the recovery so far has been led by the services sector in London and the South East but there’s been a softening in some of that and a pick-up in manufacturing, and over the last three months we’ve seen a pick up in employment in the North East and North West.
“The biggest deliverers in employment was in the North East, so I think that really is positive for setting the UK on a more balanced growth path. The job creation really is something to celebrate.”