- Capital investment to fall to £2.3 billion in 2025-2029: OEUK
- Almost half of additional output would be uneconomic: OEUK
The UK’s new tax regime for North Sea oil and gas could lead to an investment slump of more than 80%, the industry lobby group warned.
Changes already announced by the new Labour government, including an increase in a windfall tax and removal of an investment allowance, could mean a drop in capital spending on UK projects from 2025 to 2029 to just £2.3 billion ($3 billion), compared with an estimate of £14.1 billion under the current fiscal regime, Offshore Energies UK said in a report on Monday.
The tax changes “will trigger an accelerated decline of domestic production, and a corresponding reduction in taxes paid, jobs supported, and wider economic value generated,” David Whitehouse, chief executive officer of OEUK, said in a statement.
Over the next five years, almost half of the additional oil and gas production that could have be given the go-ahead under the current tax regime would be uneconomic under the new proposals, according to the OEUK report. That puts more than 35,000 jobs at risk in 2029 due to projects not going ahead, it said.
In an effort to fill a £22 billion black hole she said was left by the previous government, Chancellor of the Exchequer Rachel Reeves said she would raise the UK’s Energy Profits Levy by three percentage points, bringing the headline rate of tax for UK oil and gas producers to 78%, and remove a 29% investment allowance. The changes will be finalized in an October budget statement that Prime Minister Keir Starmer warned last week will be “painful.”
Reeves said the changes to oil and gas taxes would bring in annual revenue of £1.2 billion, while OEUK estimated that proposals could yield just £2 billion over the five-year period because of the investment slowdown.
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