finance

Industry warns Chancellor that windfall tax could harm investment


The windfall tax could damage investment in the North Sea, the Chancellor Rishi Sunak has been told.

He unveiled the measure last month, after calls from Labour, which will put a 25% surcharge on profits of oil and gas giants.

It is hoped the policy will raise as much as £5bn, but energy firms have warned it could be detrimental to the sector.

During a roundtable meeting in Aberdeen on Thursday, Offshore Energy UK chief executive Deirdre Michie pressed Sunak on the issue.

“The energy profits levy is an unexpected new tax that changes the basis for investments,” she said.

“We had a candid and constructive meeting with the Chancellor to discuss these issues and our industry leaders were clear about their concerns, especially the impact on investor confidence – both sides have committed to further discussions.

“We will work constructively with the UK Government and do our best to mitigate the damage this tax will cause, but if energy companies reduce investment in UK waters, then they will produce less oil and gas.

“That means they will eventually be paying less taxes and have less money to invest in low carbon energy.”



Chancellor Rishi Sunak addresses a Treasury Connect event in Aberdeen

A consultation on the policy is due to close on Tuesday.

According to the Treasury, Sunak stressed the importance of the sector to the UK’s transition away from fossil fuels, as well as emphasising that the levy will provide tax relief on investments within the sector.

Andy Samuel, chief executive of the North Sea Transition Authority, said: “We very much appreciated the constructive meeting – the tripartite between Government, industry and the NSTA remains crucial for energy security and achieving net-zero.

“We welcome the consultation on the draft Bill – it is crucial to get it right and more broadly to restore investor confidence and support important projects including clean power for offshore installations.”

A UK Government spokesman said: “As set out in the British Energy Security Strategy, and with Putin’s invasion of Ukraine illustrating the merit of this, North Sea oil and gas are going to be crucial to the UK’s domestic energy supply and security for the foreseeable future – so it is right we continue to encourage investment there.

“The levy’s investment allowance means businesses will overall get a 91p tax saving for every £1 they invest – this nearly doubles the tax relief available and means the more a company invests, the less tax they will pay.”

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