Leading trade body, Offshore Energies UK (OEUK) has published data to help inform decision making ahead of the Chancellor’s Autumn Statement in October on the potential impact of the government’s announced stronger Energy Profits Levy (EPL) on the UK economy, predicting that this would generate a loss of c.£13bn compared to the economic contribution generated under the current windfall tax regime.
The data shows that if the headline tax rate is increased to 78% and all EPL allowances are removed, this would lead to:
a reduction in viable capital investment from £14.1bn to £2.3bn between 2025 to 2029;
approximately 35,000 jobs at risk over the period due to projects not going ahead; and
63% of additional production that could be sanctioned under the current regime would be uneconomic, with the UK having to be more reliant on other countries to meet the UK energy demand.
Although the sector’s total tax yield is expected to peak in 2026 before declining, continued uncertainty over the timeframe of the sunset clause and the treatment of capital allowances has also further undermined the confidence of companies to invest in UK oil and gas production.
David Whitehouse, OEUK Chief Executive Officer said: ‘This is a government that has made economic growth its main priority and yet our analysis shows that its policy will ultimately reduce this sector’s contribution to the UK economy. With an industrial strategy built in partnership with government, the UK can leverage the strengths of its offshore energy industry, put homegrown innovation and technology at the heart of its net zero ambitions, and ensure the UK is globally attractive for energy investment.
‘For more than two years UK oil and gas operators have paid three times the rate of corporation tax of any other sector in the economy. Time is running out to mitigate damage that has already been done and to avoid further escalation. We now need an honest conversation on how we can do this and need Government to work with the sector at pace’, he added.
Leading trade body, Offshore Energies UK (OEUK) has published data to help inform decision making ahead of the Chancellor’s Autumn Statement in October on the potential impact of the government’s announced stronger Energy Profits Levy (EPL) on the UK economy, predicting that this would generate a loss of c.£13bn compared to the economic contribution generated under the current windfall tax regime.
The data shows that if the headline tax rate is increased to 78% and all EPL allowances are removed, this would lead to:
a reduction in viable capital investment from £14.1bn to £2.3bn between 2025 to 2029;
approximately 35,000 jobs at risk over the period due to projects not going ahead; and
63% of additional production that could be sanctioned under the current regime would be uneconomic, with the UK having to be more reliant on other countries to meet the UK energy demand.
Although the sector’s total tax yield is expected to peak in 2026 before declining, continued uncertainty over the timeframe of the sunset clause and the treatment of capital allowances has also further undermined the confidence of companies to invest in UK oil and gas production.
David Whitehouse, OEUK Chief Executive Officer said: ‘This is a government that has made economic growth its main priority and yet our analysis shows that its policy will ultimately reduce this sector’s contribution to the UK economy. With an industrial strategy built in partnership with government, the UK can leverage the strengths of its offshore energy industry, put homegrown innovation and technology at the heart of its net zero ambitions, and ensure the UK is globally attractive for energy investment.
‘For more than two years UK oil and gas operators have paid three times the rate of corporation tax of any other sector in the economy. Time is running out to mitigate damage that has already been done and to avoid further escalation. We now need an honest conversation on how we can do this and need Government to work with the sector at pace’, he added.
