The UK’s oil and gas industry has warned the Prime Minister that the cost of a hard Brexit on the industry could be £500 million a year. This would be if the UK found itself using World Trade Organisation (WTO) rules, which would increase the cost of trading oil and gas from £600 million a year to £1.1 billion.
The UK’s oil and gas industry had a very difficult year in 2016, due to falling prices and increasing costs and it is feared that a hard Brexit could add to the pressure on the industry. A group lobbying for the industry has urged the Government to consider this when negotiating with the European Union. Since the 1960’s the UK’s oil and gas industry has contributed £190 billion towards the exchequer and this is the first time in its history there has been so much uncertainty hanging over it.
If the UK was to turn to WTO rules it could face up to a 3% tariff to export goods, causing considerable cost increases for companies exporting the majority of their products or services. This could cause the price of gas to increase within the UK, which would then be passed onto businesses.
It is hoped that during negotiations, the Prime Minister will be able to agree a free trade agreement with the European Union, allowing businesses to continue operating within the UK at a lesser cost. However it is the uncertainty during the negotiations causing the largest amount of damage in the short term.