Jobs and Scotland’s economy may be disproportionately affected if the UK delivers an out vote

The oil price plunge and the imminent arrival of a National Living Wage are adding an unwelcome nervousness to a Scottish employment market already affected by weaker 2016 growth forecasts.

On top of that, we must now wait for June 23 and the collective voice of Britain in deciding the big economic question of EU membership, with its own cocktail of sub-texts for employment and skills.

We’re cautioned by some that if the UK leaves the EU, a second Scottish Independence referendum moves closer. If investors were spooked the first time, surely the recurring prospect would have a longer-lasting negative impact upon Scotland’s location case?

Oil and Brexit represent two clear examples where Scotland’s employment landscape and that of the rest of the UK are not entirely in harmony. Wednesday’s release of the Government Expenditure and Revenue Scotland (GERS) data, compiled by Scottish Government economists, shows much lower tax receipts from oil, a symptom of slashed company profits.

Overall, most of British industry and its consumer base has enjoyed the triggering of a pressure relief valve. The cost of energy for manufacturing has tumbled in response to North Sea Brent crude’s low barrel price. Lower fuel costs for logistics operations has helped bolster margins and sustain numerous jobs.

In Scotland, those benefits have been overshadowed by closer proximity and bigger exposure to an oil price crash that has eroded an economic return on extracting North Sea oil reserves.

The cumulative effect is an estimated 65,000 direct, supply chain and indirect job losses. Staff numbers in Aberdeenshire’s secondary economy, from swish hotels to corner shops, are threatened. Scottish Ministers insist the economy remains fundamentally robust. But, politics aside, it’s worth sharing their worries over the EU debate.

UK Continental Shelf (UKCS) oil reserves remain considerable and last year yield volume recorded a healthy increase. But at current prices, attracting further capital to maturing assets instead of newer, potentially more profitable investments overseas, is problematic. Brent has dipped below $30 a barrel. Currently it is achieving around $40; still far short of the threshold that emboldens heavy investment.

Oil companies once regarded $60 a barrel as a game changer, tolerable for perhaps 18 months. It is now 18 months since prices crashed through the floor. All the exploration majors, like BP, agree there is little medium-term sign of a turnaround. As for the equally important engineering and services sector, influential Aberdeen-based multi-national Wood Group confirms it also sees no sign of the dramatic change in UKCS fortunes necessary for a road to recovery announcement.

Industry body Oil and Gas UK in its 2016 activity survey notes an alarming cut-back on new project expenditure – with less than £1bn expected to be spent this year. Typically, £8bn has been spent in each of the last five years.

A successful programme of efficiency measures away from redundancies, coupled to increased production and reduced costs (including redundancies and Government concessions) may have made a useful mark on balance sheets. But the sustainability of pay remains doubtful.

It is true there have been job-saving mergers in the SME oil services arena. Acquisitions have also been made by larger players absorbing technology-leading but struggling small specialists – victims of scale and, like Scotland as a whole, vulnerable to risk from an imbalance in sources of income.

Engineering services firms are pragmatically eyeing UKCS decommissioning contracts for end of life assets. Aberdeen’s and Dundee’s jobs markets could be winners, attracting work to expanded port facilities. But it doesn’t address the slack.

Reinvigorating meaningful levels of investment in Scotland’s energy sector, repairing its headcount, seems likely to be a thwarted dream without further UK government intervention. Valuable transferable skills underpinning future technology-based enterprise will otherwise be lost in the absence of new concessions.

Inaction will elongate the journey toward the higher salary economy that brings Living Wage affordability.

Our future capacity to compete with our closest geographic rival, George Osborne’s imagined Northern Powerhouse, will be diminished.

Clearly scale and spread of risk play a significant role as Scotland approaches Brexit decision time. We have less scope than the UK’s England-centric economy to entertain doubt.

For those in England there is a different set of variables influencing support for or against David Cameron’s EU-In recommendation. It’s certainly complicated. In Scotland, the decision is far easier.

If the UK turns its back on being a lead team member in the imperfect 28 state alliance, Scotland’s economy and job prospects will once again be disproportionately affected – negatively. In light of the new fiscal framework for Scotland, a UK Government would concentrate effort elsewhere unless for strategic asset security.

Some economists offer plausible medium-term arguments suggesting a unified UK could stand strong without the burdens or benefits of EU membership. If I worked in England, I might be in two minds about my vote. After all, pro-EU economists speak of "risks" rather than quantifiable fact. A "leap in the dark".

Looking in isolation at Scotland’s economic outputs, major export destination growth (ignoring intra-UK trade), improving in-work figures, skills shortages and continuing Independence conversation, the Out arguments collapse, reminding us of vulnerabilities.

In the interests of Scotland’s workforce, to my mind June 23 demands an In outcome.