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BDO warning over oil and gas sector

BDO warning over oil and gas sector

Scottish firms reliant on North Sea oil and gas are being warned to consider restructuring their finances in case the situation in the sector worsens.

Accountancy and business advisory firm BDO LLP issued the warning in the wake of the substantial reduction in the oil price and the consequent job losses and cost cutting announced by major oil and gas developers.

The North Sea supports an estimated 375,000 people, with 281,000 jobs as well as a further 94,000 in hospitality and leisure.

The hospitality sector has boomed in the north east over the last few years, but occupancy levels started to fall in the last few months of 2014.

The property and construction sectors may also face a reduction as demand reduces due to employment uncertainty.

Scottish Government statistics reveal Aberdeen has 9,985 enterprises generating £57.9 billion per annum; equivalent to 21% of the turnover of all companies in Scotland.

There are 740 enterprises with 250-plus employees generating £43.2bn, meaning just 7% of companies account for three-quarters of total Aberdeen turnover.

Bryan Jackson of BDO said: “We can assume that many of these large firms are in the oil and gas sector so if they start to depart from the North Sea then the knock-on effect on the economy of Aberdeen, Aberdeenshire and the rest of Scotland is likely to be substantial.

“All businesses should regularly review their financial position. Now it is important to examine in detail the operational costs, the long- and short-term financial liabilities, and the ability of the business to survive in the event of a loss of income from a downturn in the North Sea oil and gas sector.”