Carney: Scotland will take hit on oil price slump

Governor of the Bank of England, Mark Carney. Picture: Getty

Governor of the Bank of England, Mark Carney. Picture: Getty

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SCOTLAND’S economy will be harmed by the low price of oil – but the fall will be good for the rest of the UK, said Bank of England governor Mark Carney yesterday.

While the rest of the country would benefit from low petrol prices, Scotland would take a “hit” because of the effect on the North Sea oil industry, he said.

First Minister Nicola Sturgeon. Picture: Andrew Cowat

First Minister Nicola Sturgeon. Picture: Andrew Cowat

Appearing before a Commons committee of MPs, Mr Carney added that the “negative shock” in Scotland would be “substantially mitigated by the fiscal arrangements in the UK”.

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His comments came as First Minister Nicola Sturgeon unveiled plans for an Energy Jobs Taskforce to deal with the impact on Scotland’s oil industry, as she visited Aberdeen.

Scottish Secretary Alistair Carmichael hinted there could be fresh tax breaks for the industry in the forthcoming Budget as he warned the UK and Scottish governments “must do more” for the industry.

Mr Carney said Scotland would face a “hit” on its economy from the near six-year low in oil prices.

Answering questions from the Commons Treasury select committee, he was asked about an estimate that the slide would blow a £6 billion hole in Scotland’s gross domestic product (GDP).

He said: “It is a negative shock to the Scottish economy, but it is a negative shock substantially mitigated by the fiscal arrangements in the UK.

“My personal view is that the net impact of the decline in the oil price at this stage is net positive for growth in the UK.”

Mr Carney suggested the impact on Scotland of the lower price would be cushioned by the wider benefits to the UK as a whole, because falling petrol prices were putting more money into consumers’ pockets.

The governor said the Bank had not calculated a figure for what the “hit” to Scotland would be, but 15,750 Scottish jobs could be at risk, according to Scottish Parliament researchers.

The global oil price has fallen to below $50 a barrel from a summer high of $110, leaving thousands of North Sea oil jobs in jeopardy.

Energy analysts at Wood Mackenzie have warned if the price slipped below the $40 mark, operators could consider closing down wells.

It told Scottish Energy News that with prices at $50 a barrel, oil production would cost more than its value in 17 countries, including both the UK and the US.

The SNP has been under fire in recent weeks over what its opponents say is its sluggish response to tumbling oil prices which have placed thousands of North Sea jobs at risk.

As a result, Ms Sturgeon announced an Energy Jobs Taskforce is being set up to deal with the unfolding crisis in Scotland’s oil and gas industry.

Yesterday she met oil industry chiefs in Aberdeen, and announced a guarantee for modern apprentices in the oil and gas sector. It means any apprentice being laid off will be offered alternative employment or “off the job” training.

The new taskforce will be headed by Scottish Enterprise boss Lena Wilson and will report to the Scottish Energy Advisory Board, which is chaired by Ms Sturgeon.

The First Minister said: “The recent drop in the price of a barrel of crude oil, combined with the mismanagement of oil and gas fiscal policy by the UK government, and other challenges facing the industry, pose a threat to a number of jobs.

“That’s why I have established the Energy Jobs Taskforce, to make sure that partners are working across the sector both to maintain jobs and to mitigate the potential impact of any losses.

“I have asked that the first meeting of the taskforce be held by the end of January, and I have no doubt that, under the leadership of Lena Wilson, this will be positive for the industry.”

The First Minister also confirmed yesterday that the second meeting of the travelling Cabinet will be held in Aberdeen in February.

The tumbling oil price would have left a black hole of up to £18bn in the finances of an independent Scotland in the first few years after leaving the UK.

The SNP had predicted an oil price of about $110 after a Yes vote.

Mr Carmichael will be in Aberdeen today to meet industry representatives and said the collapse of the price of a barrel of oil was a sign of “extraordinary times”.

“I’m not going to say what is in the Budget but we know these are extraordinary times and the government will have to come forward with measures that are suitable for the times,” he said.

“Whatever we do has to be good enough to not allow the industry to rush into decommissioning. This is still an industry with a future.

“My real concern at the moment is that the people who always get hit earliest and hardest when there is a downturn in the oil industry are the small and medium-sized companies.

“Government will need to do more to help the industry both in Edinburgh and in London.”

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