Contribution to the UK Economy

Employment

In 2004 the total employment provided by the oil and gas sector in the UK was estimated at 340,000 based on a recent study commissioned by UKOOA. These comprised 31,500 people employed in oil and gas companies and major contractors, a further 223,000 employed within the wider supply chain and 85,000 jobs supported by economic activity induced by oil and gas employees spending throughout the wider economy.

In 2005, employment in the oil and gas sector is estimated to have risen to 365,000. This is a 25,000 increase in employment over a year and is derived from the £1 billion increase in oil and gas companies/major contractors’ capital investment and expenditure during 2005. In 2006, it is projected that total employment will rise further to 380,000, with 290,000 directly employed by oil and gas companies and within the supply chain, as a result of the continued increase in investment and operating expenditure in the basin.

The increase in employment witnessed over the last two years has not risen as quickly as total spend, in part because of recent rapid cost inflation which has been demonstrated in the sharp rise in development and lifting costs. However, higher activity levels are evident throughout the industry which will continue to encourage and sustain job creation.

Figure 9: UK Oil & Gas Industry Employment 1991-2006

It should be noted that current employment estimates are higher than those suggested by previous research. In past studies, the knock-on impact on employment as expenditure trickled down from the initiators of the activity was less well recognised. In this latest study the operating expenditure and capital investment from major contractors are for the first time treated in a similar fashion to that of the oil and gas operators. Given the bigger initial cash injection considered, it then follows that the number of jobs derived from spending within the supply chain is larger than previously estimated.

There are distinct regional clusters of oil and gas employment within the UK. Over 100,000 high skilled oil and gas jobs are provided in Scotland alone because of the presence of the UK oil and gas industry. When total economic activity is included the industry provides employment for around 150,000 people in Scotland. Four parliamentary constituencies in the Aberdeenshire area account for 38% of all UK jobs supported by the upstream oil and gas industry. Outside the Aberdeenshire area, regions that are home to ports and terminals where oil and gas come ashore (Eastern England 5%) as well as the major construction and fabrication yards (North West England 6%) have high levels of employment, as does the region where many oil and gas companies locate their headquarters (South East England including London 21%).

Figure 10: Regional Distribution of Total UK Oil & Gas Industry Employment 2004

Examining the distribution of supply chain jobs indicates that the range of suppliers is diverse. However a few key industries are particularly important. Metal products, construction and engineering industries account for 16%, 15% and 8% of total jobs respectively. There are also substantial purchases from the business and professional service sector (12%), the legal sector (8%) and banking, finance and insurance (5%).

Figure 11: Industry Distribution of UK Oil & Gas Industry Supply Chain Jobs 2004

Figure 12: UK Oil & Gas Industry Employment by Parliamentary Constituency
List of Parliamentary Constituencies