Can Houston based Oil & Gas players benefit from ‘Brexit’?
With the Offshore Technology Conference once again heralding the arrival of so many Scottish and UK businesses to the city, it is an ideal time to reflect on the impact that Great Britain leaving the European Union might have for Houston-based organisations that deal with them.
Of course we still do not yet know what deal will be struck between the UK and EU, and whether or not it may even happen at all. The UK and EU recently agreed a 6 month delay to Brexit making the intended date of departure the 31st October. This buys both sides some negotiating time but more importantly allows companies additional time to consider their strategy, something we have been working with our clients to achieve.
And, as with any change in circumstances, there are sure to be challenges and opportunities.
For the moment there is a total lack of agreement on what tariffs might be applied to goods being imported and exported between the UK and the EU, and how that will be resolved is still anyone’s guess.
One area of concern for Houston’s Oil & Gas service sector companies that rely on an integrated approach to selling into Europe or sourcing products from Europe is supply route disruption.
What affected businesses can do now is work with advisors like Burness Paull to assess how their contracts would deal with the impact of such disruption; Have you thought about your pricing? How might Brexit affect the other party? For new contracts which you are currently negotiating, the same issues need to be considered.
Another issue which could become a problem for the sector is currency value. If a bad ‘Brexit’ deal severely weakens the British pound it will make goods from Houston a lot more expensive and slow demand from North Sea operators for their products.
Nevertheless anyone sitting in Houston looking across the Atlantic should be able to see real growth opportunities too.
The flip side to a weak pound is a strengthened dollar which would reduce the costs of buying British products for operators in the US who import skills or equipment from the UK. It would also make it easier for US based companies to acquire assets or companies in the UK and, of course benefit those who enjoy fine Scotch whisky and a round at the best golf courses in the world.
In sectors such as offshore construction and decommissioning Brexit has the potential to create a more level playing-field in markets currently dominated by big European industrial companies.
If you currently have no business in Europe and the UK then you may also be at an advantage to competitors who could suffer disruption to supply lines that run through European ports such as Rotterdam.
Immigration for skilled US staff may become easier as the UK looks to fill supply gaps caused by a restriction of movement of workers from the EU.
And the prospect of a new free trade agreement between the US and the UK could open up further opportunities and make business between the countries even more attractive than it already is.
However it shakes out in the end any slowdown in trade between the UK and Europe necessarily leaves gaps to be filled, and there are strong reasons to suspect that the US - and Houston in particular - is very well placed to benefit. The contingent of UK businesses that visit The Energy Capital of the World for OTC each year is evidence of a strong link that already exists, built mainly on this industry but diversified hugely across the economy.
That means that there will be opportunities for those willing to invest in the UK - and US businesses may get even more used to welcoming their British counterparts to H-town.
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