Economic analysts have forecasted that Aberdeen and Aberdeenshire will continue to face challenges, with the city experiencing a loss of nearly 18,000 jobs since 2010.
The latest Scottish Autumn Forecast from EY ITEM Club presents a grim outlook for the North-east, particularly concerning the oil and gas industry.
Russell Borthwick, chief executive of Aberdeen & Grampian Chamber of Commerce (AGCC) called for policy makers to take action in response to the report.
He said: “This report should act as yet another wake-up call to policy makers both north and south of the border.
“The energy sector is an industry of enormous economic importance Scotland, and it is vitally important that the Scottish Government abandons its ill-conceived presumption against oil and gas and hastens spending and action on energy transition.
“With the Just Transition Fund now in its fourth year, only £75million of a promised £500million has been spent and there is no clarity at all on the £500million Offshore Wind Supply Chain fund.
“Meanwhile the scale and pace of progress towards net zero is behind where it needs to be to secure jobs and drive supply chain opportunities. The investment is needed now, not at some undefined point in the future, and we again urge the Finance Secretary to address this in her Budget this week.
“At the same time, we need to UK Government to accelerate plans to replace the punitive windfall tax with a proportionate tax regime for the North Sea – one which gives operators a more level playing field and long-term clarity on project return on investment through the next 10 to 15 years. This successor regime cannot wait until beyond 2030, by which point enormous damage will have been done to our energy workforce.
“The vast majority of oil and gas jobs (90%) are within our world class supply chain – the same supply chain we need to deliver a successful energy transition. Every job we lose makes that transition even harder.”
The EY ITEM Club report warns the oil and gas industry is “expected to decline each year over the forecast horizon”.
It states: “We believe the continued decline of oil and gas employment is likely, given the Scottish Government’s commitment to net zero and despite the recent discovery of 131 cubic feet of natural gas in the Selene prospect in the North Sea.
“Although believed to be commercially viable, discoveries like these are unlikely to shift the long-term decline of the sector.
“Aberdeen City and neighbouring Aberdeenshire are forecast to continue to struggle.
“Aberdeen is one of the few local authority districts in Scotland to have fewer jobs in 2023 than in 2010. During this time, it has lost nearly 18,000 jobs, equivalent to 10% of its workforce in 2010, largely due to the ongoing decline in the locally important oil and gas industry.
“During the same period, employment in Aberdeenshire expanded by 7%, only slightly below the Scottish average of 8%. However, Aberdeenshire has a large manufacturing sector that is anticipated to decline in the future and against a backdrop of relatively weak average GVA growth of just 1.0%, employment is not expected to grow in the district over the 2025 to 2029 period.
“Meanwhile, Aberdeen’s prospects remain heavily tied to the oil and gas sector, and we forecast average GVA growth of just 0.8% a year over the next five years.
“However, prospects could improve if investment into Aberdeen is significant and effectively targeted. In support of this view, the city has been chosen to host the headquarters of Great British Energy, the UK Government’s new company to invest in clean, UK-derived energy and backed by £8.3billion in government funding over this Parliament.
“The move forms part of the government’s plans to support clean energy in the North Sea and promote Aberdeen as Scotland’s clean energy capital.
“As well as the Great British Energy, Aberdeen featured in the top 10 UK cities for FDI in 2023, attracting 13 FDI projects according to the EY Attractiveness survey. Indeed, ONS data show that almost 41,000 jobs in 2023 in Aberdeen were in firms with foreign ownership, equivalent to almost a third of total employment in the city.
“Aberdeen also had a slightly higher share of high growth businesses than the Scottish average. And with favourable demographic characteristics, the risks for Aberdeen’s outlook are weighted towards the upside.”
Figures from across Scotland reveal a “stubbornly high” rate of economic inactivity, sitting at 23.7%, which is an increase from the last quarter and higher than the UK average of 21.8%.
Analysts warn that the statistics indicate that 32% of Scotland’s economically inactive individuals are suffering from long-term illnesses, in contrast to 28% for the entire UK.
The report emphasises that lowering the rates of economic inactivity is “key to supporting long-term growth in the UK and Scotland”.