Contribution to the UK Economy

Capital Investment, Gross Value Added and Expenditure

Production and manufacturing industries together invested £16 billion in 2005 in the UK, no less than one third of which (over £5 billion) was made by oil and gas explorers and producers and the supply chain on their behalf, as shown in Figure 3. No other industrial sector came anywhere near this rate of investment which is indicative of the industry’s importance for productive investment and its commitment to recovering the maximum amount of oil and gas within the prevailing business climate.

Figure 3: Industry Investment 2005 by Sector

However, investment forms only one part of the industry’s annual expenditure. Figure 4 shows that oil and gas producers have spent a total of £370 billion (2006 prices) exploring for, developing and producing reserves from the UKCS since 1970.

Figure 4: UK North Sea Expenditure 1970-2006

The ‘value added’ by an industry sector is the value of its sales after deduction of its costs. Oil and gas production contributed £22 billion to the UK economy’s ‘value added’ (13% of all production and manufacturing industries) in 2006. Given that supply chain sales are dominated by high technology goods and services, there is a further sizeable contribution to the UK’s ‘value added’ not represented in Figure 5.

Figure 5: UK Oil and Gas Industry Gross Value Added 2005