Low oil prices could fuel UK jobs growth, says PwC
Prolonged low oil prices would boost employment in the UK, according to a PwC report.
The UK could experience an employment boost of 121,000 by next year if oil prices settle at $50 per barrel, says a PwC report, when compared to a scenario where prices remained around their mid-2014 highs at $108 per barrel. Furthermore, a prolonged period of low oil prices would increase overall economic activity in the UK.
Since June 2014, the oil price has declined significantly and at its lowest point had lost over 60 per cent of its value. The collapse in the price of oil may have been detrimental to the economies that rely on oil exports for growth, however, it has been seen as a boon for those that do not.
In fact, the PwC report notes that GDP could be boosted by around one per cent on average between 2015 and 2020 if the price of oil stabilised around $50 per barrel. Not to mention, the employment market would also gain a significant boost.
“If the oil price were instead to settle at $50 per barrel, however, then the eventual boost to UK employment could be more than twice as large as this at around 90,000 in 2020,” said John Hawksworth, chief economist at PwC.
“Real household incomes also rise as oil prices fall, which increases consumer spending. And as a result of growing economic activity, we expect that government tax revenues will rise as the tax take from corporate and personal income taxes increases by more than the loss of North Sea oil and gas revenues.”
However, benefits to the economy and to the jobs market would diminish if prices recovered further. If the price of oil partially reversed back up to $73 per barrel employment will only be boosted by 53,000 and 37,000 by 2016 and 2020, respectively. If the price totally recovers back up to $108 per barrel, the benefits become significantly smaller.
“Lower oil prices should therefore have a positive impact for most sectors of the economy, households and the government, but the scale of these benefits remain highly uncertain depending on how oil prices evolve from here,” Mr Hawksworth noted.
To read the full report please click here.