Falling oil prices continued to impact UK oilfield services (OFS) in 2016, with the sector’s turnover falling by 15.5%.
That’s the suggestion from consultancy EY, which warns the industry’s approach to recovery in 2018 could prove critical for long-term success.
The report shows turnover declined from £35.7 billion in 2015 to £30.2 billion the following year, with reductions in profit across the whole supply chain.
It highlights how less than 2% of UK firms in the OFS industry achieved growth of more than £10 million and the earnings before interest and tax margin fell 0.8% as various cost saving initiatives proved less successful than envisioned.
EY says although operators have saved money by improving production efficiency rather than investing in standalone projects, a continued lack of investment in new projects means this is not a sustainable solution long-term.
Derek Leith, EY Partner and Head of Oil and Gas Tax, said: “UK OFS companies cannot rely on growth in the UK alone to increase revenues and must both internationalise and diversify their operations to ensure long term survival.
“While it is encouraging to see a rise in export activity it is concerning that access in overseas markets is still very modest.”