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Chamber boss calls for reboot of Aberdeen City Region deal ahead of chancellor’s budget

Port of Aberdeen. Image: Port of Aberdeen
Port of Aberdeen. Image: Port of Aberdeen

A business group has called for a new City Region Deal for the north-east ahead of the Chancellor’s Spring Budget on Wednesday.

In a letter sent to Jeremy Hunt, Aberdeen and Grampian Chamber of Commerce (AGCC) chief executive Russell Borthwick said “attention must turn to what comes next” saying the existing 10-year city region deal initiated in 2016, had been “a showcase for delivery at pace”.

The city region deal saw both the UK Government and Scottish Government jointly commit up to £250m whilst Aberdeen City Council, Aberdeenshire Council and local partners committed to investing up to £44m throughout the decade.

Mr Borthwick said the deal has been a “showcase for delivery at pace and attracting additional funding from the private sector, bringing the entire investment envelope to over £1 billion”.

With attention now turning to “what comes next”, he asked the UK Government to match the £500m committed by the Scottish Government as part of its ten-year Just Transition Fund.

Described as “a new deal to energise the north-east”, AGCC said the move would create “an ambitious, strategic programme aligned with our refreshed Regional Economic Strategy.

“This will enable us to emulate the success of the current City Region Deal delivering strong return on investment and enabling this part of the UK to punch above its weight as a contributor to the exchequer for another 50 years and more,” the letter adds.

Aberdeen’s Net Zero Technology Centre (NZTC). Image: NZTC

The Net Zero Technology Centre, formerly the Oil and Gas Technology Centre, was opened in 2017 as a core part of the deal. Funding was also given to the tune of £20m for the Bio Therapeutics Hub at the Foresterhill Health Campus, close to Aberdeen Royal Infirmary.

Move net zero department

Mr Borthwick has also asked for the UK’s energy department to be moved to the north-east.

He said moving key functions of the newly revamped Department for Energy and Net Zero (DESNZ) to the region would be a “perfect opportunity” to deliver the government’s levelling up agenda.

The letter stated the north-east has “as a unique opportunity to be at the forefront of the UK’s transition to net zero” thanks to its energy expertise, but that “urgent support” from government would be needed to make good on its ambitions.

The chamber reported “a growing sense of concern” from members that recent policy decisions were making the task “more challenging” and set out a series of asks ahead of the Spring Budget. These include revisions to windfall taxes on oil and gas, a “new deal” to deliver a just transition for the region and relocation of DESNZ functions, among other requests.

Moving duties to the region would be welcome recognition of the Granite City’s role in energy the transition and its local energy ecosystem, said Mr Borthwick

It would also put the department close to major North Sea operators, the highest concentration of energy supply chain companies in the UK and a 45,000-strong offshore energy sector workforce.

End ‘disproportionate’ windfall tax

Echoing calls from the oil and gas sector, the AGCC’S primary ask was for a “stable fiscal regime” as a remedy to what it called the “overly severe application” of the government’s Energy Profits Levy (EPL), which it said have created “an adverse environment for investment and jobs”.

Noting that tax intakes had risen from £381m per month in February 2022 to £1.8bn today, it called the five-year horizon of the levy “disproportionate” and urged reform “as an immediate priority”, alongside the instalment of a price floor mechanism.

Last week trade body Offshore Energies UK also wrote to Mr Hunt, warning that billion-pound M&A deals had already gone overseas due to EPL, which has “eroded millions” from the values of North Sea firms.

windfall tax
Russell Borthwick, chief executive, Aberdeen & Grampian Chamber of Commerce (AGCC).

Alongside a price floor, it called for further incentives for decarbonisation investment and creating a long-term investment regime.

The International Association of Drilling Contractors (IADC) North Sea chapter sent a similar letter to all MPs and MSPs asking for “more vocal support” for the oil and gas industry.

Despite pleas however, tax experts have suggested the Treasury is unlikely to tinker with any of the EPL measures in his announcement.

Open invitation

AGCC also called for more investment in grid connections and capacity to enable the swift progression of new offshore wind projects – including Scotwind developments – and north-east supply chains.

Finally, it added its members to the chorus of voices from across the region in asking for clarity on the future of the Acorn CCS project.

Mr Borthwick closed the missive by inviting the Chancellor to visit Aberdeen in the coming weeks to take part in a roundtable discussion with industry stakeholders.

The Treasury has been approached for comment.