AROUND one in five firms working in the North Sea oil and gas sector expect to cut jobs next years as the fallout from the coronavirus crisis continues to take a toll on the sector.

The finding comes from a study by Aberdeen & Grampian Chamber of Commerce (AGCC) that provides fresh evidence of the scale of the challenge caused by the crisis.

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This has sent oil and gas prices plunging, resulting in deep cuts in spending by firms that operate fields. Businesses working offshore are facing serious logistical complications associated with social distancing measures.

Oil prices rose to the highest level since March yesterday, at above $47 per barrel, amid growing hopes that an effective coronavirus vaccine could be made available soon.

However, they remain well below the levels recorded before the pandemic erupted. There remains huge uncertainty about the pace of any recovery from the global economic downturn it caused.

The chamber said it was too soon to say how progress on the vaccine front will impact on companies’ plans for next year.

The study was conducted before three different groups announced positive test results for coronavirus vaccines.

It found a majority of firms that provide support for companies that operate oil and gas fields expect the outlook to worsen in 2021.

The cuts in jobs that are in prospect next year will heighten the strain on the labour market that has already been caused by the downturn in the North Sea.

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The report found around 50 per cent of contractors have already cut UK workforce numbers. It was produced by the chamber of commerce with Strathclyde university’s Fraser of Allander Institute and accountancy giant KPMG.

The majority of firms have made use of the Government-funded furlough programme to help them retain jobs.

Mairi Spowage, deputy director of the Fraser of Allander Institute, noted: “The extension to the furlough scheme by the UK Government is a welcome relief to many in the industry as they look ahead to the next few difficult months: this will support companies through and help to protect jobs in the short term.”

However, the chamber of commerce said the study findings underlined the need for governments to encourage the increase in activity required to underpin the future of the sector.

This could include helping firms to capitalise on opportunities that will be presented amid the drive to cut carbon dioxide emissions to help tackle climate change.

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Sector leaders have highlighted the potential for firms in the oil and gas supply chain to support the development of offshore renewable energy and carbon, capture, storage and usage facilities.

Shane Taylor, research and policy manager at AGCC, said the UK and Scottish governments must work with the industry to finalise a North Sea Transition Deal.

Industry body Oil & Gas UK has said such a deal could provide vital support for the sector.

It warned in April that up to 30,000 North Sea oil and gas sector jobs could be lost this year. The industry was thought to support around 150,000 jobs at the time, including people working for firms that operate oil and gas fields and for services firms.

A series of firms have announced hefty job cuts since then.

However, Martin Findlay, senior partner at KPMG in Aberdeen, said there was room for some optimism.

“The industry, unlike so many others, is incredibly resilient and frequently deals with instability and challenge,” said Mr Findlay.

He noted that climate change and diversification offered opportunities. The survey findings suggest the sector is starting to embrace change.

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Oil and gas firms are more optimistic about their prospects in international markets, compared with the North Sea, but this may provide little comfort.

The chamber said: “The latest results mark the lowest recorded levels of confidence in global markets in the history of this survey”. It has been running for 32 years.

The latest survey had responses from 100 firms.