British energy supply-chain companies are facing a variety of tough headwinds in today's difficult economic environment.
Trade body Offshore Energies UK (OEUK) highlighted yesterday that there is a lack of confidence across the sector.
Supply-chain contract margins are being eroded by high inflation, while firms have reported that operating costs have jumped by up to 20% since early 2021. And other woes include higher post-Brexit administrative costs.
Katy Heidenreich, OEUK's supply chain and people director, said: "We are seeing businesses battling to control inflation and, at a national level, we know Brexit has had an impact - making it harder to import and export goods and take advantage of business opportunities within EU countries.
"Most recently, companies or all sizes in our sector have been hit by the uncertainty created by the increase of the energy profits levy when we were already the most highly-taxed industry in the UK."
OGUK says more action is now needed from both government and industry to support supply-chain firms in playing a critical role in sustaining oil and gas activity while helping to build the UK's low-carbon future energy systems.
Attractive environment
The trade body's new supply-chain report calls for a stable regulatory and fiscal framework which gives the supply chain a predictable and attractive business environment to continue investing in the UK's energy security.
OEUK also asks government to work closely with industry to inform decision-making and policies which ensure suppliers have better visibility and certainty of opportunity and improve their ability to invest in technology development, skills and innovative ways to deliver a net-zero future.
Ms Heidenreich said: "Our offshore energy supply-chain is an amazing and strategic national asset.
"In 2022, these companies helped the UK oil and gas industry contribute £28billion gross value added (GVA) to the economy.
"Over the next decade this sector plans to spend over £200billion, providing jobs for over 200,000 people, as it expands low-carbon energy production.
"A world-leading, diversifying energy supply-chain is developing but, through engaging with our members and feedback from two surveys, we know they face major headwinds.
Lack of confidence
Our sentiment survey revealed there's a lack of confidence across the sector.
"Around a fifth of supply-chain companies surveyed said poor visibility of the future UK projects is affecting their ability to plan and service activity both in the near and longer term - a problem that OEUK is working with industry to address."
The report outlines how the UK's energy supply-chain ranges from major contractors with a global presence delivering integrated oilfield services to small-scale local firms with specialist capabilities.
Ms Heidenreich added: "Our UK supply-chain is critical to our efforts to deliver a carbon-neutral basin by 2050 and our new report highlights the scale of the challenge ahead.
"Both industry and government have a vital role in ensuring this strategic national asset can continue to sustain current demand for oil and gas energy, while building the capability to deliver a home-grown low-carbon energy economy.
"Failing to act now means we will see investment, equipment and resources being diverted overseas, so the race is on.
Work together
"We must ensure we work together to create an industry-wide solution to this challenge.
"We are stepping up our work with government to make sure the UK is competitive as a destination for manufacturing and investment and sharpening efforts to help ensure our supply-chain captures at least half of the project activity ahead.
"Boosting our supply-chain will enable us to develop engineering, manufacturing, services and technology expertise to support the evolving low-carbon energy mix and create a globally-competitive energy supply chain of international repute. The time to act is now."