Lerøy to lay off 339 processing staff in wake of new tax proposal

Bergen, Norway-headquartered fish farming and fishing company Lerøy Seafood has confirmed redundancy notices were sent out 9 November, 2022, to 339 employees at four of its processing operations.

The affected companies are: Lerøy Aurora AS, Skjervøy, where 158 employees are being laid off; Lerøy Midt AS (with two plants at Hitra), where 125 employees will depart; and Lerøy Fossen AS, Osterøy, where 56 employees are to go.

In a press release, Lerøy blamed the move on the “chaotic situation” caused by the Norwegian government’s proposed 40 percent resource rent tax on salmon farming, which would move the total tax faced by Norway’s salmon farmers to 62 percent when corporate tax is included.

“We want to create as many jobs as possible along the Norwegian coast based on the fish we produce. We no longer get the opportunity to do that. The market opportunities for processed Norwegian salmon are more or less completely gone after the government's tax proposal. The result is that we do not have work to offer many of our employees and then we have no other choice but to notify layoffs,” Lerøy CEO Henning Beltestad said.

Beltestad said the redundancies would also affect the company’s suppliers and customers. 

“Although we have worked intensively for over a month to get contracts in place with our customers, we have not succeeded. To process the salmon, we have to have long-term contracts, and this market has almost completely disappeared following the government's proposal to triple the tax and the model they are using. If we don't have customers for our processed products, we can't produce them either,” he said. “I am sure that this is not the government's intention, but it is very much the consequences of their proposal. Neither we nor our customers can take the risk of having to pay tax on an income we may not have.”

Bjarne Kristiansen, who heads the cooperation committee for Norwegian Business and Leisure Workers' Union (NNN) in Lerøy maintains that the tax proposal is “very poorly prepared and poorly thought out,” and that the only way to correct it would be to postpone its introduction until 1 January, 2024, at the earliest, following consultations.

“Then we can hopefully get a broad settlement that ensures framework conditions for aquaculture and a tax scheme that neither destroys the industry, the coastal districts, nor our employees,” Kristiansen said.

Currently, the government's proposal for ground rent will apply from 1 January, 2023, while a final tax model will not be decided by Norway’s Storting until the summer of 2023. Only then will companies know what tax they must pay for the past six months and what details form the basis of a possibly new tax base, Beltestad said.

“It is critically important that the government understands the industry's entire value chain, the level of activity and central function in the Norwegian coastal community,” Beltestad said. “When we see that we do not have tasks for our employees, we are obliged to notify them, that is what we are forced to do. We hope that the politicians listen, and wake up, so that any changes in taxation are based on facts and the knowledge that we know will emerge in the consultation round. The change cannot be made effective before 1 January, 2024. It is urgent if we are to succeed in reestablishing the trust of our customers and redundancies can be avoided. This is very serious.”

On 3 October, Lerøy announced it would not proceed with a 614-metric-ton (MT) maximum-allowed biomass farming permit it had purchased earlier in 2022 for NOK 123 million (USD 11.3 million, EUR 11.6 million), stating that increasing the overall tax rate from 22 to 62 percent “creates unreasonable framework conditions for the industry in Norway,” and also that it changes the scope and incentives for investments in areas other than maintenance capex.

Lerøy also said that all major new investments in the group’s value chain in Norway would “regrettably be put on hold” pending the decision on the new tax. Additionally, its board of directors decided to halt its NOK 420 million (USD 38.7 million, EUR 39.6 million) investment already underway to increase processing capacity at Skjervøy in Troms.

Photo courtesy of Lerøy Seafood