The UK Government has been warned about the risks associated with its proposal to increase and extend the windfall tax on energy companies, citing risks to thousands of jobs and billions in investments.
Offshore Energies UK (OEUK) wrote an open letter signed by more than 40 organisations to UK Minister of State for Industry and Decarbonisation Sarah Jones, expressing concerns about the recently approved 3% increase in the Energy Profits Levy (EPL), which will raise the headline rate to 78% and extend it until 2030.
The trade body’s letter also addressed the elimination of the investment allowance and the reduction in capital allowances, warning that these changes pose a significant risk to thousands of jobs and companies vital to the UK Government’s industrial strategy and its efforts to achieve net zero targets.
“For our companies, this surprise poses the risk operators – big and small – further scaling back or postponing their investment plans in response. The ramifications will be felt throughout the supply chain, through jobs, and the communities this industry supports, directly and indirectly,” the letter reads.
The letter mentioned that several companies in the sector use oil and gas profits to fund renewable energy projects, which it claimed could be negatively impacted by the suggested measures.
OEUK CEO David Whitehouse said: “This letter shows the level of concern felt by supply chain companies about the government’s new tax proposals.”
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“If oil and gas operators scale back activity because of the proposed changes to the levy, it has a direct impact on our world-class supply chain.”
However, the UK Treasury has affirmed that its industrial strategy aims to generate “thousands of new jobs in the industries of the future”.
The government intends to raise windfall taxes on oil and gas profits, prolong the tax for six years, and eliminate tax benefits for additional investment. It would also remove the levy’s main 29% investment allowance for qualifying expenditures incurred on or after 1 November 2024.
A Treasury spokesperson stated that, as reported by the BBC, they are “enhancing the windfall tax from the previous government to ensure that North Sea oil and gas producers contribute their equitable share to our energy transition”.
UK Chancellor Rachel Reeves has previously mentioned that some taxes will be raised during the autumn Budget, but the Labour Party has also assured that there will be no tax increases for “working people”, the BBC said.
