This month, leading trade body Offshore Energies UK (OEUK) released data
modelling the potential impact of the UK government’s changes to the Energy Profits Levy (EPL) on the UK economy.
The data showed that increasing the headline EPL rate to 78%, extending the timeframe for a year, and removing all allowances associated with EPL compared to the current regime would lead to a £12bn reduction in capital investment, risk 35,000 jobs, and a long-term decline in tax revenue.
Grant Morrison, partner in Aberdeen and head of oil and gas at RSM UK, comments: “Modelling from the OEUK highlights the importance of government revisiting the Energy Profits Levy (EPL) ahead of the Autumn Budget to help secure economic growth and ensure the UK’s energy sector remains globally competitive, along with securing the UK’s future energy requirements. Government’s proposed fiscal policy to increase the headline EPL rate to 78% and remove all associated allowances would be a major risk to the energy sector’s performance, due to loss of investment, employment and productivity, with the impact felt widely across the economy.
“Increasing EPL rates and removing allowances could potentially drive investment away from the UK to other countries with more favourable tax regimes, as well as increasing our reliance on importing energy, with the OEUK estimating a total capital investment reduction on the UKCS from £14bn to £2bn between 2025 and 2029. The latest EPL data from the ONS also shows a steady downward annual trend of revenues since the windfall tax was first introduced in 2022, supporting industry concerns about the shrinking tax base and its ability to fund GB Energy.”
He added: “While the UK’s transition to net zero is a priority for policymakers and businesses, ensuring the UK’s competitiveness to attract and retain investment in the energy sector also needs to be prioritised. Encouragingly, the Chancellor has announced plans for a new industrial strategy at the Labour Party Conference, which presents an opportunity to leverage the UK’s key energy sources and make use of homegrown talent to innovate and invest in new technologies. However, it remains to be seen how this will translate into the remit and effectiveness of GB Energy.” /Ends