Changes to the energy profits levy brought in under the UK government’s budget serve a “devastating blow” to oil firms, the chairman of a body representing independent oil and gas producers has warned,
This comes shortly after chancellor Rachel Reeves confirmed the 3% increase under the windfall tax, also known as the energy profits levy (EPL).
The already controversial fiscal policy is now set to stand at 38%, bringing the headline rate of tax imposed on UK North Sea operators to 78%.
Chairman of BRINDEX, Robin Allan, has said: “This disruptive, self-harming and counterproductive torturing of the UK oil and gas fiscal regime will deal a devastating blow to an industry which employs hundreds of thousands of people from communities around the UK.
“The tax rate faced by the UK oil and gas sector is double what it was at the start of 2022, and more than three times that faced by other sectors.”
The BRINDEX boss argued that although “the government may believe that they are punishing the ‘energy giants’,” it is in fact “disproportionately” impacting smaller oil businesses.
He added that such firms account for “the majority of UK oil and gas production and carbon storage licenses. ”
Allan continued: “The energy giants will happily produce oil and gas overseas and ship it to the UK, increasing the UK’s hydrocarbon imports. These imports offer no economic, environmental, geopolitical or social advantage.
“Oil imported from the USA doesn’t provide British jobs, LNG imported from Qatar or Peru is four times as carbon-intensive at the point of delivery as gas produced from our shores and takes weeks to arrive, while gas piped from Europe doesn’t sustain communities in Teesside or Merseyside.”
Warnings of ‘mass unemployment’
The trade association boss claimed that the fiscal changes will result in “mass unemployment”.
The BRINDEX chairman lambasted the “poorly thought-out policy”, claiming that it will “backfire on the government”.
He added: “The only question is when that realisation of error will take place, and whether or not that moment is early enough to address and reverse the untold damage inflicted on a critical industry.”
Previously, trade body Offshore Energy UK (OEUK) has reported that changes could cause a £13 billion hit to the UK economy and destroy 35,000 jobs.
OEUK has also estimated that more than 200,000 livelihoods depend on the sector across the UK.
This figure takes into account direct, and indirect jobs such as those supported in professional services firms working with industry as well as induced jobs such as those in sandwich shops, bars and restaurants.
Allan said: “It is evident that ideological factions within the government are driving a policy which is contrary to the UK’s national interest.
“There is no mandate for weakening energy security and destroying communities through mass unemployment.”
The Autumn Statement, presented by Reeves on Wednesday, claims it sets out to save jobs by maintaining the capital allowances found under the EPL.
The document states: “The government is committed to managing the energy transition in a way that supports jobs in existing and future industries and so will retain the availability of 100% first-year capital allowances within the EPL.”
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