City Deal aims to diversify economy

Cameron pledges support for Aberdeen

CameronPrime Minister David Cameron today unveiled a £250 million package of measures to help Aberdeen cope with severe the downturn in the oil and gas industry.

In addition to the UK City Deal, signed earlier in the day, Mr Cameron set out an action plan of further measures to “help build a bridge to the future for the industry”.

Investment will be forthcoming for the harbour and an innovation centre. Other measures include an Oil and Gas Ambassador who will be appointed to help ensure the best possible access for UK companies to markets overseas, promote the North Sea around the world and boost inward investment.

There will be a £20m package of investment in exploration, innovation and skills and a UKCS Decommissioning plan will be published by the early summer to enable the £15bn Aberdeen service sector to become the centre of a new global market.

The help offered today was in addition to £1.3bn of tax measures announced in the Budget last year.

Secretary of State for Energy and Climate Change Amber Rudd said: “The UK Government is backing our oil and gas industry, the hardworking people it employs and the families it supports.

“We’re stepping in to provide the extra support needed now with £20m of funding for seismic exploration to help industry find new oil and gas reserves. But we’re also determined to build a bridge to the future and make sure the expertise we hold in areas such as decommissioning can become a UK success story, boosting our economy, supporting jobs and creating more financial security for families.”

The Scottish government match the City Deal with its own £254m package of support for infrastructure, such as rail links.

Mr Cameron yesterday told the Commons during PM’s questions that he shared concerns about the plight of the sector which, he said, is suffering from the longest slump in the oil price for 20 years.

“I am determined to build a bridge to the future,” he told MPs.

His comments followed a meeting of the Scottish Cabinet which called on Westminster to use the tax system to help the industry.

John Swinney, the Deputy First Minister, is to demand a meeting with the Chancellor George Osborne to discuss measures that could be included in the Budget.

The Cabinet meeting was attended by Scottish Enterprise chief executive Lena Wilson who chairs the government’s energy jobs task force.

> Reaction to the City Deal announcement: 

Deirdre MichieDeirdre Michie, chief executive of Oil & Gas UK, said: “We very much welcome Prime Minister David Cameron’s visit to Aberdeen and his recognition of the seriousness of our situation.

“Companies are doing all they can to bring down costs and be more efficient, but many are still having to make difficult decisions. Support from both the UK and Scottish Governments, the Oil and Gas Authority and local authorities is vital so it is extremely timely that the Deal will see co-operation between these parties.”

Ms Michie also welcomed the new ministerial group on oil and gas, chaired by Energy and Climate Change Secretary, Amber Rudd.

Derek Leith, EY head of oil and gas, tax said: “The deal will help establish the north east as a hub of technology and innovation. It comes at a pivotal time for the north east economy and will provide a much needed boost through increased investment in large scale infrastructure projects, such as rail and road improvements, as well as digital connectivity and city centre regeneration.

“It has the potential to make a material difference to the everyday lives of local residents who will benefit from more investment in the city’s affordable housing stock. The focus should now shift to implementing the deal as quickly and smoothly as possible.

Derren McRae, managing director of property consultancy CBRE in Aberdeen, said:   “City Deals have been an established part of the economic development agenda for cities in England for some time and projects emerging from the Glasgow and Clyde Valley City Deal suggest that such interventions can create a future platform for new development and investment from both private and public sectors.

“But the City Deal is not a quick fix for short term issues; what it will do is release much needed investment into physical and digital infrastructure, and that in turn will allow the private sector to see a better long term future for new investment.”

Ian Armstrong, NE regional director, SCDI, said: “The City Region Deal is a welcome step in the right direction which will help to address current pressures and support the innovations the oil & gas industry will need as a mature basin in a lower oil price world and the diversification of the economy in other key and emerging sectors.

“But it is only a first step – a higher commitment behind this new approach will be required by all levels of government and the private sector to make the transformational investments which position Aberdeen city region as a global energy hub and a more diverse economy.”

Ross MartinRoss Martin, chief executive, SCDI, said: “With more devolution and decentralisation of powers in progress, and the continuing need to rebalance the economy, this is the mature approach which will increasingly be needed to maximise investment and its returns for the economy and society.

“With a city region deal already in place for Glasgow and the Clyde Valley – and now this commitment to take forward a new city region deal for Aberdeen – Inverness and Highland and Edinburgh and South East Scotland should be the next to agree additional levers and resources to drive and diversify their economies.”

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