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Windfall tax turmoil risks jobs, investment and economic growth

6 March 2024

Today’s budget announcement extending the windfall tax on North Sea oil and gas producers is a disappointing blow to the industry which risks jobs, investment and economic growth, says Offshore Energies UK.

“The industry is being taxed on windfall profits which no longer exist and facing a fourth round of fiscal change and turmoil in less than two years, making it impossible to plan investment for the energy transition and the path to net zero,” says David Whitehouse, chief executive of Offshore Energies UK.

The windfall tax properly known as the energy profits levy or EPL was introduced in May 2022 following Russia’s invasion of Ukraine and imposes a 75% tax rate on the North Sea energy industry.

OEUK has repeatedly pointed out that the price of gas in the UK is almost 10 times lower than the peaks seen when the tax was introduced, and the price of oil has returned to the level before the Ukraine invasion.

The Chancellor’s plan to continue the tax undermines OEUK’s manifesto proposals for a homegrown energy transition intended to boost domestic energy investment and drive the shift to greater production of wind and hydrogen energy, alongside the introduction of large-scale UK carbon capture and storage facilities.

The manifesto published last week shows how a new era of homegrown energy, highly skilled jobs and growth can be created if private investment conditions are right.
Instead, the UK is now more likely to rely on imported energy – and rely on other countries to deal with the associated carbon emissions.

David Whitehouse, CEO Offshore Energies UK said:

“We are extremely disappointed that the government continues to ignore clear evidence that we need investment in offshore energy production to grow the economy and achieve net zero.

“We have identified £200 billion of investment in oil and gas and the UK’s wider energy transition awaiting the green light which will not happen with such globally uncompetitive taxation in place.

“Thousands of jobs and billions of pounds in national revenue are at risk because of the destabilising impact of these tax decisions.

“A homegrown energy transition will simply not move forward unless business confidence for long term investment in the UK is restored.”

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