Business Outlook 2020 - Activity and Supply Chain

BUSINESS OUTLOOK 2020: Activity and Supply Chain

Supporting Industry Now

Job Retention Scheme The Job Retention Scheme currently allows companies to furlough staff up to the end of June, however it will take longer than this for activity levels to increase within the oil and gas industry. An extension of the scheme with a defined end date of at least the end of 2020 (rather than a rolling extension) is recommended. This would allow companies to plan resources more effectively and could limit the number of redundancies in the short term. Firm confirmation from the government that oil and gas companies are able to access this scheme is also required, reflecting that the collapse in demand has been driven by COVID-19. Covid Corporate Financing Facility (CCFF) Current credit rating requirements are constraining access to the scheme. OGUK recommends that the entrance qualifications should be widened to cover organisations that can demonstrate an improving credit rating that has risen over the last two years to the equivalent of over CCB+. A dedicated analysis and support team should be established to help with the process of assessing the eligibility of businesses. Coronavirus Business Interruption Loan (CBIL) Scheme OGUK welcomed the extension of the scheme to include larger companies. However, it is recommended that there should be caps to interest rates and enhanced security from government to reduce company guarantee requirements (especially for smaller companies). New Proposal — Equity-based finance solution This scheme would involve business banking or private equity firms investing capital in major supply chain companies backed by the ability to convert this investment into a shareholding. It is proposed that an element of this risk is backed by the government, either in the form of guarantees to the investment firm or via a state owned ‘bad bank’ concept. OGUK are working closely with other trade associations, including the CBI, to further develop this proposal.

It is imperative that companies who are facing immediate financial distress are able to access support from the government to help overcome short-term cash flow issues. This is crucial in maintaining jobs and capabilities that will be required to meet current and future demand across the energy sector. Almost 30 per cent of companies who responded to OGUK’s Business Sentiment Survey reported successful access to financial support through one of the government support schemes, while 43 per cent said they were still evaluating whether support would be required and if they would be able to access the schemes. OGUK has noted that some of the mechanisms within the main support schemes hinder their ability to support companies in our industry effectively and has suggested amendments, as well as a proposal for a new industry-specific support mechanism.

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