UK Government to align with economic needs of Scotland? Some chance
“THE UK Government must adopt a business-friendly approach which aligns with Scotland’s economic needs.”
That was the message this week from hotelier Stephen Leckie, of Crieff Hydro fame, in his capacity as president of Scottish Chambers of Commerce.
The context – not surprisingly surely for anyone who has been following the challenges facing businesses the length and breadth of Scotland and indeed the UK in the post-brexit world created by the Conservatives – was barriers to hiring overseas staff.
In Mr Leckie’s own sector, hospitality, and myriad others, workers from the European Economic Area have made such a valuable contribution over years and decades.
The Conservatives, with their hard Brexit, have delivered a huge blow on this front by ending free movement of people between the UK and EEA.
This has fuelled skills and labour shortages greatly.
People could be forgiven for thinking, looking at the current state of affairs, that things could hardly get much worse.
However, the Conservatives have fashioned another hurdle, which will be put in the way of businesses from next month.
This is a near-50% rise in the minimum salary threshold for a “skilled worker” visa.
From April 4, the minimum salary to be sponsored for such a visa will jump from £26,200 to £38,700.
It is surely inconceivable that the ruling Conservatives do not realise the effect this will have in making the UK’S skills and labour shortages even worse. Of course, their latest big move to clamp down on immigration is surely fuelled by ideology. And recent history has shown the Brexiters’ ideology is very far away indeed from reality.
Mr Leckie, for his part, outlined the problems quite simply this week, noting the new salary threshold is “far higher” than average pay in Scotland and the natural implications of this.
And Scottish food and drink industry leaders, as revealed by The Herald in February, wrote to Secretary of State for the Home Department James Cleverly warning him of the dangers of his “proposals to reduce net migration to the UK by increasing salary thresholds for skilled workers” alongside other planned measures.
This warning looks, unsurprisingly, to have fallen entirely on deaf ears.
The February letter came from Iain Baxter, chief executive of Scotland Food & Drink. It was also signed by the chiefs of the National Farmers Union of Scotland,
Quality Meat Scotland, Salmon Scotland, Seafood Scotland, and the Scottish Agricultural Organisation Society.
Declaring they were “deeply concerned” by his proposals, they told Mr Cleverly: “Raising the skilled worker salary threshold to £38,700 will make the new minimum level higher than many of the vacant roles across the industry. This and the other changes planned will make it harder for businesses to recruit from overseas and for workers who might have considered applying. The impact will be worsened labour shortages, reduced profitability, higher prices and disruptions along the supply chain.”
This seemed like a simple enough message, and one that a government with a genuine interest in business and the economy would surely heed.
Sadly not so, however, with the Conservatives still planning to press ahead with their planned changes.
Mr Leckie, presenting the findings of Scottish Chambers of Commerce’s latest quarterly economic indicator this week, said: “Changes to the UK immigration system also threaten to harm Scotland’s attractiveness, with a planned 50% rise in the minimum salary threshold for a skilled worker visa from April. This policy alone will make it impossible for many Scottish businesses to hire international staff as the salary threshold is far higher than Scotland’s average wage.”
Of course, this latest barrier to doing business comes in very challenging times.
Mr Leckie said: “The latest insights from Scottish business underscore the extreme cost pressures facing companies in all sectors. The persistently high cost of doing business is hammering cashflow and profitability which will hit the economy in the long term.
“The operating environment – nationally and globally – is exceptionally challenging.”
This makes the latest Tory hurdle to business and the economy all the more unwelcome.
Labour has said it would ask the Migration Advisory Committee to review the new Tory immigration rules, including salary thresholds, and make a decision based on these findings.
The committee is an independent, non-statutory, non-time limited, non-departmental public body that advises the government on migration issues, with the Home Office as its sponsoring department.
While Labour’s stance indicates some hope of the latest ill-judged Tory moves on immigration being at least partially unwound, Labour has not committed to do so.
And it looks as if businesses will be stuck with the new rules coming into effect from next month for a while, given a general election will not be until later this year and a review by the Migration Advisory Committee would presumably take some time.
Furthermore, Labour looks somewhat scared of its own shadow on immigration, given its seeming focus on pandering to so-called
“red wall” voters who switched from the party to vote for Boris Johnson in the December 2019 election because of their love of Brexit.
Labour has also ruled out rejoining the single market so, looking further out, there looks to be little hope of relief on this front even if the party does win the next general election. Restoring free movement of people between the UK and EEA through rejoining the single market would shift the dial in terms of addressing skills and labour shortages and boosting the growth potential of Scotland and the rest of the UK.
For now at least, of course, the Conservatives remain in power.
So the assertion made by Mr Leckie – that the “UK Government must adopt a business-friendly approach which aligns with Scotland’s economic needs” – is one for them.
It would be a brave person indeed who would attach any significant probability to the Conservatives doing any such thing, given their track record and all-encompassing ideology.
It looks as if businesses will be stuck with the new rules for a while
NORTH Sea giant Enquest has declared profits have been hit by the windfall tax as it revealed details of its first shareholder distribution since the company was established 2010.
The company cited the impact of the energy profits levy as it reported a statutory loss after tax of $30.8 million for 2023, down from $41.2m in 2022, stating that the windfall tax had also affected its ability to access capital. It paid $175.1m under the levy, which has lifted the headline rate of tax on oil and gas company profits to 35%, in 2023, up from $72.15m the year before.
The windfall tax was introduced by the UK Government in May 2022 in response to the extraordinary profits energy companies began making after Russia’s invasion of Ukraine led gas prices to spiral.
But despite being subject to a first full year of the levy in 2023, Enquest, which holds stakes in North Sea assets such as Magnus, Kraken, and Golden Eagle, said it will complete a share buyback of $15m (£11.9m) during 2024, although it will not pay a dividend for 2023.
Enquest revealed the buyback as it told the City it had slashed net debt by 32.9% to $481m by December 31, despite a “challenging UK fiscal environment”, and has cut debt further since year-end. Net debt had fallen to $409.6m at the end of February.
Enquest said it had reduced borrowings in 2023 amid a strong operational performance, which saw production average 43,812 barrels of oil equivalent per day, at the midpoint of guidance, down from 47,259 boepd the year before.
This came against a backdrop of what the company described as “continued geopolitical tension, inflation, and sterling volatility”, with Brent prices 18.2% below 2022 levels at £82.5 per barrel of oil, and gas prices down 51.4% at 98.9p per therm. Commodity prices eased over 2023 after rising sharply in light of Russia’s full-scale invasion of Ukraine, which began in February 2022.
Enquest is forecasting net production guidance between 41,000 and 45,000 boepd in 2024, which includes impacts from drilling campaigns at Magnus and Golden Eagle assets in the North Sea, and the PM8/ Seligi field in Malaysia, as well as maintenance activities across its portfolio.
Despite the challenges posed by the UK windfall tax, the company signalled its appetite for acquisitions.
Chief executive Amjad Bseisu said: “Enquest achieved its 2023 targets, delivering strong operational performance across the operated portfolio and continuing to de-lever its balance sheet, with year-end Enquest net debt reduced to $48m.
“Against the backdrop of a challenging UK fiscal environment, Enquest has reduced net debt by c.$1.5 billion since its peak and with significant tax assets remaining, the business has a strong base, and successful track record of executing quick payback, life-extending acquisitions, from which to pursue value-accretion and production growth through M&A (mergers and acquisitions).”
Mr Bseisu noted the company had in 2023 realised value within its portfolio by selling a 15% share in the Bressay licence and the Enquest Producer FPSO (floating production, storage and offloading) facility to Rockrose Energy for £46m in December. It then received $85.6m for a 15% farm-down of capital items identified as suitable for use on the Bressay development, with the company stating that the two transactions “delivered an important step” in bringing the Bressay heavy oil field east of Shetland into production.