Brexit ‘will raise costs and may cause serious staffing difficulties’

UK energy bills are likely to rise; Britain’s oil and gas industry has just three or four years to ‘get its act together’; and there’s a danger of serious problems with skilled staffing levels in the industry – these were the broad outcomes from an event held at the Energy Institute last month to define the likely implications of Brexit on the UK energy sector.

Five expert speakers covering academia, utilities, renewables and the oil and gas industry didn’t exactly reach agreed conclusions, but these three themes emerged.

Debate centred on the unknown quantities at the centre of Brexit – will the UK manage to keep hold of membership of the Internal Energy Market (IEM), or perhaps access to it? The former could be seen as an aspiration or negotiating stance; the latter an acceptable outcome but, it was said, why should all the other member states be willing to allow either? Continued participation in the IEM is important because wholesale energy prices tend to be lower on the continent. 

A second question was where the estimated £200bn of investment needed to modernise Britain’s power generation assets is going to come from, once the UK moves from what seemed to be, back in June, an amicable divorce from Europe and is now turning into something rather more ugly. However, replacing old and long-amortised power stations with new generating capacity is going to be expensive in or out of Europe – and will necessarily add upward pressure to energy bills.

The Brexit process has come at the worst possible time for Britain’s oil and gas industry, already suffering from the lowest oil price for years; the industry certainly doesn’t need more uncertainty connected to the prospects of new barriers or complications from leaving the EU. And the industry is directly in the firing line of any new restrictions on the employment and movement of overseas staff that may follow the Brexit process. From the start of North Sea operations in the 1970s, Britain’s oil and gas industry has been highly multi-national – new restrictions on European staff or British people working in Europe would be very damaging. At worst, new restrictions and costs could cause the 300,000-strong industry to be reduced to a much smaller group that looks after just the decommissioning of redundant offshore structures.

New staff movement restrictions would also be damaging for the wider UK energy industry, and for academia – we need good, skilled but foreign people to stay working in Britain. It’s time the government made a move to clarify that this is at least a central aim of Brexit negotiations, even if it cannot eventually be achieved.  

The top priority across the industry is some certainty about what will happen, particularly for access to the IEM and for staffing – though there was little confidence that the government can deliver this.