North Sea oil and gas- impact on UK economy

History has important lessons. What happened to UK economy with discovery of oil and gas in North sea?

The discovery of large quantities of oil and gas in the North Sea has been one of the most dramatic events in the post-war history of the UK. The direct and indirect effects have permeated the whole country. The balance of payments and the public finances have benefited greatly since the 1970s.

The first commercial oil field dates to 1969 when what is now the Arbroath field was discovered. It was the discovery of the giant Forties field the following year that confirmed the exploration potential of the waters off Scotland and led to a rapid succession of further substantial discoveries in the first half of the 1970s. In this period the British economy was suffering from continuing balance of payments problems which were exacerbated by rapidly rising oil import bills.

Oil production grew extremely rapidly from negligible levels in 1975 to over 2.5 million barrels per day in 1985. The North-East economy shared in this boom. The population trend was dramatically reversed, with Grampian region exhibiting a growth from 436,000 in 1971 to 480,000 in 1981, and 533,000 in 1995. Unemployment rates became extremely low and average male earnings rose from 85% of the UK national in 1972 to well over 100% by 1978.

Many of the traditional industries were not inherently very profitable and their ability to withstand increased costs was very limited. The textiles, papermaking, traditional engineering, fishing and fish processing industries all experienced declines in the period since the 1970s. The continued growth of the oil-related sector countered the loss of employment elsewhere.

From an early date local companies were able to become involved in basic activities such as catering, supply boats and bases. Where higher levels of technology were required, existing (foreign) companies had initial advantages which newcomers found difficult to match. This applied both nationally and locally. There have, of course, been some spectacular exceptions such as the Wood Group. In more recent years smaller local companies have become increasingly innovative and have made important contributions to technological progress in the North Sea. Further, local companies have become increasingly involved in export markets in recent years,

source: Prof Alex Kemp