North Sea energy companies have seen shares plummet following the publication of Labour’s manifesto in which the policies put forward demonstrate a 'fatal misunderstanding' of the economics and realities of the industry.
Sir Keir Starmer announced his party's pledges in Manchester, including promising to make "oil and gas companies pay fair tax on the massive profits that they're making." Last year, Harbour Energy, the largest producer of oil and gas in the UK, posted profits of around £25m. Meanwhile, retailer Marks and Spencer, made post-tax profits of £364.5m, and Celtic Football Club made profits of more than £40m.
In reaction to Labour's plans to increase and extend the Energy Profits Levy (EPL) and remove investment allowances, shares at Deltic Energy slumped 19.05% on Thursday, Serica Energy shares fell 10.80%, while Harbour's dropped 3.64%.
Sir Keir also promised not to award any new licences to oil and has firms in a bid to "ensure a phased and responsible transition in the North Sea".
The manifesto also includes plans to set up a publicly owned energy company, Great British Energy, which Sir Keir recently confirmed won't actually produce any energy.
Industry critical of energy plans
Russell Borthwick, Chief Executive of Aberdeen & Grampian Chamber of Commerce, said Labour's plans for the industry leave the country at the "mercy of global events".
He welcomed Labour's "ambitious" plans in offshore wind, carbon capture and hydrogen, but warned they're overshadowed by a "double hammering of the North Sea".
Mr Borthwick said: “Ending new licences alongside a beefed up windfall tax puts tens of thousands of jobs and the UK’s energy security in real peril. Something now agreed on not just by industry but also investors, academia and the Trade Unions.
“Time and time again we have explained to Labour that political rhetoric is making the North Sea an un-investable proposition for energy companies. These are the same energy companies who will drive our transition to net zero. And yet they remain deliberately obtuse, conflating global profits with activities in the UKCS.
“They absolutely must provide more clarity around investment allowances so businesses know where they stand. The Norwegian model so coveted by Labour has these in place as a vital part of the checks and balances. Unilaterally removing these here will be the straw that breaks the camel’s back.
“There will be no North Sea cash cow to milk if it’s dispatched to the knacker’s yard. There will be no way to deliver the energy transition if our world class supply chain and the brilliant people working in it up sticks and leaves the UK for good.
“And finally, Labour fatally misunderstands the economics of the North Sea by claiming that issuing new licences will not cut fuel bills. By relying more on imported energy, which will be the consequence of their policy, costs will almost certainly increase and we put ourselves at the mercy of global events, as has been evidenced by recent events in New Zealand."
Unions refuse to endorse energy plans
Ahead of the manifesto release, the UK's largest trade union, Unite, remained unimpressed by Labour's "insistence" on banning new licences "without first having a concrete plan for jobs".
“Workers faced with plans to cut fossil fuels need new jobs to stop their livelihoods being lost,” said Unite General Secretary, Sharon Graham.
She added: “And we have an investment gap compared to our competitors that will require billions more to fill.
“With rising geopolitical tensions, a cost of living crisis and rampant inequality, now is not the time to be timid.”
The GMB union passed a motion earlier in the week which called the party's net zero plans "unviable".
Some positive developments
Mr Borthwick added that some " eye-catching" pledges in Labour's manifesto will be welcomed.
He said: “There is also plenty of ambition to welcome on offshore wind, carbon capture and hydrogen." Labour is demonstrating significant ambition in their plans for a mission-led industrial strategy and investment in port infrastructure, vital if we are to get the transition right.
“Away from energy policy, leaving the door open to future corporation tax cuts will catch the eye of many businesses and their plans to replace business rates in England with a fairer system that takes into account online sales is something we will be watching closely in Scotland with a view to much needed changes being made to the archaic system here.