Government tax row puts Tyneside job creation at risk as oil firms cancel major contracts

A Government tax row has put Tyneside job creation at risk as oil firms cancel major contracts

The new Technip building on the bank of the river Tyne at Wallsen
The new Technip building on the bank of the river Tyne at Wallsen

A Government tax row has put Tyneside job creation at risk as oil firms cancel major contracts.

The Government has been urged to act as stalled talks with the energy sector over tax rises see major investment decisions put on ice, meaning long-term uncertainty for North East firms working in the oil and gas supply chain.

The danger comes as new figures show UKTI is failing to bring in enough jobs to the region. Behind the scenes talks with the trade group are ongoing as it emerges that only 2.8% of total projects landed by UKTI go to the North East, despite the region having the UK’s highest unemployment rate.

With the double threat to North East jobs, one Labour MP has called on the Government to unfreeze offshore investments.

North Tyneside MP Mary Glindon told the House of Commons that firms in the region were concerned that their success was being put at risk by a Government row with energy firms.

She said: “Is the Secretary of State aware that all the new oil and gas platform construction projects for this year have been either cancelled or postponed, which will have a devastating effect on employment in my constituency and others in the North East, as well as those in Scotland? Will he, together with the Secretary of State for Energy and Climate Change, take immediate steps to address this matter?”

It is thought that among the many disputes holding back the decision to go ahead with further oil and gas work is a concern among the private sector that the brownfield incentives that are used to make drilling cheaper are not sufficient.

The North East subsea sector is a £1bn turnover industry and in Newcastle, offshore fabrication group OGN is one of many firms to create jobs as a result of firms drilling for oil in the North Sea. The Wallsend-based business designs and builds platforms for the UK and European offshore oil and gas industry, bringing in hundreds of jobs in the process.

Chairman Dennis Clark said talks were still ongoing between the big firms and Government, and was confident the situation would improve in the coming months.

He said: “We are disappointed at the moment that the progress we would have hoped to have made on tenders for next year’s contracts has not been seen. As it stands those contracts are no longer available, but there are discussions ongoing.”

Business Secretary Vince Cable has insisted the sector is still growing.

He said: “There is an enormous amount of investment in the North Sea – about £13bn last year, which was a big increase. One of my and my colleagues’ objectives, through the industrial strategy, is to ensure that as much of the supply chain as possible originates in the UK, and we are working with the industry on that. I frequently meet oil companies and fabricators to try to progress that.”

A Department for Energy and Climate Change spokesperson said: “Government continues to work together with industry to try and ensure we maximise the full potential of the North Sea. This is especially important to help projects with tight margins to come to fruition. Ensuring continued investment an important part of Sir Ian Wood’s Review.”

Michael Boyd, Managing Director, Investment, UKTI said: “UKTI is working with nearly 6,000 companies that are actively seeking to invest in the UK. Of these nearly 300 are considering investing in the NELEP or Tees Valley areas.”

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