THE oil and gas industry has called for tax cuts to boost activity in the North Sea amid warnings firms may abandon the area unless the Government does more to encourage investment.

Aberdeen and Grampian Chamber of Commerce said confidence among local firms in the prospects for the United Kingdom Continental Shelf has fallen to a six year low as the sharp fall in the oil price weighs on sentiment.

In the latest survey of firms in Scotland's oil and gas heartlands, the chamber's North Sea confidence index moved into negative territory for the first time in six years, signalling a long boom in activity in the North Sea is ending.

James Bream, research and policy director at the chamber, said the record survey response highlighted a critical situation in the North Sea.

"Companies are not convinced they can get a fair return on their investment and in a global industry, it is very simple for them to move their capital elsewhere," said Mr Bream. "The Government must be aware that decisions in the next few months will also have a major impact on the £35 billion supply chain that exists in the UK."

Last month the chamber called on George Osborne to slash the headline rate of taxation on North Sea profits to 50 per cent from 62 per cent.

With around two thirds of respondents calling for reform of the fiscal regime, Mr Bream said a cut in the tax rate was needed to inspire trust in the government and show its commitment to recovering as much oil and gas as possible from UK waters.

The Chamber has not suggested that control of North Sea taxation should be devolved to Scotland.

In the organisation's submission to the Smith Commission on devolution the chamber said its research had shown members were not convinced devolution of corporation or income tax policy will benefit their business.

However, the latest call for reform of North Sea taxation will put renewed pressure on the Chancellor as he prepares to outline his tax and spending plans in the Autumn Statement on December 3.

He is also expected to publish initial findings of the review of North Sea taxation that was announced in the Budget.

The Chancellor may have limited scope to offer big tax cuts given the pressure on the public finances.

Earlier this month industry body Oil & Gas UK called for urgent reform of the tax regime highlighting escalating industry costs and the falling oil price. Brent crude traded at around $80 per barrel yesterday, compared with $115/bbl in June.

Last month accountancy giant Deloitte warned the Autumn Statement could provide the last chance for Mr Osborne to get the tax regime right. Noting low levels of exploration, Deloitte said Mr Osborne had to encourage firms to increase drilling and tempt new players into the North Sea.

Oil and gas firms have sanctioned huge investment in areas like West of Shetland since 2009.

However, the outlook for oil prices has been transformed recently amid surging production in US shale areas and slowing demand in markets such as China.

The survey found 46 per cent of respondents were less confident about their UKCS activity than a year ago. Only 15 per cent were more confident. Survey sponsor Bond Dickinson noted this is the first time since 2008 the net balance of confidence has been negative.

A balance of 24 per cent of services firms were more confident about their prospects in overseas markets.

Only 49 per cent of respondents were working at or above capacity off the UK, the lowest reading in three years.

Some 71 per cent of services firms said they could be involved in decommissioning work within the next five years as fields are taken out of service, the highest level since 2010.

Conducted by the Fraser of Allander Institute at Strathclyde University, the survey found firms that own oil and gas fields increased pay by 3 per cent in 2014, down from 6.5 per cent in 2013. Services firms increased pay by 5.1 per cent, up from 4.8 per cent.

Around two thirds of respondents said September's Scottish independence referendum had no impact on investment.

Nineteen per cent said it was difficult to isolate the impact.