Oil and gas supply chain contributes £35 billion to UK economy

Will Green is news editor of Supply Management
24 April 2014

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24 April 2014 | Will Green

The contribution of the upstream oil and gas supply chain to the UK economy has been calculated at £35 billion in 2012.

In a report EY said the sector’s turnover grew by £11.4 billion between 2008 and 2012, with an increase of 290 companies.

The report said there were 1,585 UK firms involved in the upstream supply chain in 2012, employing a total of around 200,000 people, and between 2008 and 2012 the number of employees increased by more than 21,000.

The study, commissioned by Oil & Gas UK, said growth was driven by capital investment in the UK continental shelf (UKCS) of £11.4 billion in 2012, the highest level in three decades. The report said investment hit a record £14.4 billion in 2013 and was expected to be £13 billion in 2014.

Gordon Ballard, chairman of the Oil and Gas Industry Council, said: “£35 billion in turnover marks a real achievement for our industry. In 2012, exports made up 42 per cent of the £35 billion turnover for the upstream supply chain, a percentage which has remained fairly constant over the last five years.

“The completion of this project is a real milestone for the sector and for the strategy, resulting in the most thorough piece of work ever undertaken to quantify the economic contribution of the oil and gas supply chain to the UK, and provide the market intelligence behind it.”

A second report by EY examined the contribution of three sub sectors with combined revenues of £14.1 billion – including engineering, drilling and marine equipment – to the oil and gas industry.

The report said the UKCS hit peak oil production in 1999, and peak gas production in 2000, and by 2012 oil production was 33 per cent of its peak and gas was 37 per cent.

“Despite this fall in production, there is still a significant amount of potential future activity,” said the report.

Among the threats to growth identified were increased costs, attracting and retaining qualified staff, uncertainty over shale gas activity, and concern over the result of the Scottish independence referendum.

Stephen Marcos Jones, business development director at Oil & Gas UK, said: “Both the Scottish and UK governments recognise that to stay as a global leader, we need to continue to work together to promote our advantage in the oil and gas sector and increase exports, helping to create jobs and growth.”

 

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