There are fresh calls for the windfall tax to be brought to an end after a new report predicted that Aberdeen will have the least economic growth of any UK city in the next three years.
Aberdeen will see the slowest growing gross value added (GVA) of just 0.9% according to the EY 2025 regional economic forecast. It is also bottom of the table for negative household income growth, averaging -0.4% from 2025 to 2028.
EY said it was "hard to dispute" that the oil and gas policies of the UK Government - namely the Energy Profits Levy - had played a key part in accelerating the decline of North Sea production, which is now rippling through the north-east economy.
The UK is projected to experience an average annual GVA growth of 1.6% from 2025 to 2028, with Scotland expected to reach 1.4%.
Aberdeen is projected to trail behind with average annual GVA growth of only 0.9% over the next three years due to a contraction in the energy sector and limited growth in professional services.
Aberdeen is the only UK city expected to see less than one per cent growth from 2025 to 2028, making it the lowest performing city in the UK. Aberdeen is also forecast to experience negative household income growth averaging -0.4% from 2025 to 2028.
This decline is in stark contrast to some other cities where growth in household income is projected to remain relatively strong, including Belfast (1.8%), Manchester (1.5%) and Bristol (1.5%).
EY Senior Partner for Aberdeen, Moray Barber, said: “While some of the lower performing regions and cities are already in positions of economic strength, growth – especially in terms of employment and GVA – is important to maintain that position and a competitive advantage.
“Both governments are arguably ambivalent towards new investment in oil and gas production, and the extension of the Energy Profits levy to 2030 has also acted as a barrier to investment – this despite energy price shocks over recent years, and the geo-political exposure of the UK and European economies’ reliance on imported oil and gas.
“Aberdeen continues to acutely feel the uncertainty over the UK’s energy future, and we’re seeing the reality of the resulting lack of confidence in these figures. The Chancellor’s upcoming Spring Statement – as well as the recently announced consultation to a successor regime to the Energy Profits levy - is an opportunity to reset and offer some much-needed assurance.
“If a sentiment change in global energy policy is triggered by moves in the US, then we could see an increase in finance flow into local projects and initiatives that are greatly needed if true energy transition – and revolution – is to be realised. Without it, then local jobs, our vibrant supply chain economy and the very future of the UK’s energy security continues to hang in the balance.”
Aberdeen & Grampian Chamber of Commerce policy advisor Fergus Mutch believes “poor policymaking” has put a stranglehold on growth and called on the windfall tax to be brought to an end as soon as possible.
He said: “The north-east of Scotland has been an economic powerhouse for decades. Driving economic growth and activity through the energy industry, a world-class supply chain and the high-value service sector it supports. Regrettably, recent years of poor policymaking and a punitive North Sea tax regime has put a stranglehold on growth.
“A damaging windfall tax on energy firms has been extended and increased, despite windfall conditions no longer existing. The result has been investment decisions paused indefinitely, thousands of jobs lost and business confidence at its lowest ebb.
“We’re witnessing a complete reversal in the region’s economic fortunes, dragging Scotland’s overall performance down in the process. This cannot be sustained if the UK is to have any hope of delivering a well-managed energy transition and the economic growth that we desperately need.”