The UK’s plan to raise the windfall tax on oil and gas companies has sparked concerns within the industry about its potential negative impact on economic growth. Offshore Energies UK (OEUK) warned that the increase could lead to a significant reduction in investment, potentially costing the UK economy £13 billion from 2025 to 2029 and putting 35,000 jobs at risk.
The Energy Profits Levy (EPL), set to rise from 35% to 38% on November 1, will bring the total tax rate on energy firms’ profits to 78%. The government also plans to extend the levy until 2030 and tighten investment allowances, further discouraging investment in the sector.
OEUK’s analysis suggests that while the tax hike might generate an additional £2 billion in the short term, it could result in a £12 billion loss in tax receipts and a rapid decline in sector investment by 2029.
David Whitehouse, OEUK’s chief executive, criticised the policy, stating it contradicts the government’s primary goal of driving economic growth. The Treasury, however, remains committed to discussing the changes with the industry, emphasising a responsible transition for the North Sea.
The windfall tax, introduced in May 2022 in response to soaring oil and gas prices, was initially intended as a temporary measure. OEUK argues that the conditions that justified the tax have since passed.
Business confidence has also been affected by talks of tax increases, with the Institute of Directors reporting a decline in business leader optimism and investment intentions, marking the sharpest drop since the start of the COVID-19 pandemic.
As the government prepares to outline its taxation and spending plans in the upcoming Budget, businesses are calling for a stable tax and policy framework to restore confidence and encourage investment.
