AROUND one in four small and medium sized enterprises in the UK’s key subsea engineering sector have started laying off staff amid the slump in the North Sea triggered by the coronavirus crisis.

Subsea UK found almost 23% of SMEs that responded to a survey it completed were making redundancies.

The survey findings provide further evidence of the scale of the challenge facing firms in the oil and gas supply chain following the plunge in commodity prices this year.

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Companies operating in the North Sea have slashed investment in new developments and upgrades in response, causing pain across the supply chain.

This has already resulted in thousands of job losses.

Subsea UK found only 3.5% of SMEs were actively recruiting.

Its chief executive Neil Gordon said action must be taken to support a sector which could play a key part in the drive to reduce carbon emissions by helping to develop offshore windfarms and the like.

“Given the fragility of subsea companies due to low margins, lack of resources, cash and investment and, in many cases, considerable debt as a result of the last protracted downturn, it’s vital that we do everything we can to protect the supply chain,” said Mr Gordon.

He said Subsea UK’s efforts were focused on working with government and stakeholders to make sure no stone was left unturned in exploring short to medium-term initiatives that would stimulate activity.

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However, Subsea UK said the survey findings were not as gloomy as expected. Some 56% of respondents to the survey said they were fairly optimistic about the next six to twelve months.

"The subsea industry is nothing if not resilient and, once more, we must demonstrate the ingenuity and determination that got us through the last downturn,” said Mr Gordon.

Subsea engineering firms have diversified into sectors such as renewables, aquaculture, defence and subsea mining to reduce their reliance on oil and gas.

Subsea UK said the survey findings indicated that firms’ geographic focus had not changed as a result of the pandemic.

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“In terms of geography, Europe remains a key market, followed by Gulf of Mexico, Asia Pacific, and the Middle East,” it said.

In its 2019 business activity review, the organisation found around 45,000 people were employed in the UK industry.