CHANCELLOR Rachel Reeves has been cautioned that the livelihoods of 100,000 workers depend on her decision to avoid another costly tax attack on businesses operating in the North Sea.
Before the General Election, the Aberdeen & Grampian Chamber of Commerce (AGCC) issued a warning that the incoming government has only 100 days to preserve 100,000 jobs by rebuilding investor confidence in the UK’s oil and gas sector. On Saturday, the new administration entered its second hundred days following a sweeping victory – and new research shows that the sector is facing an existential crisis.
The Chamber’s Energy Transition Survey, sponsored by KPMG and ETZ Ltd, reveals that investor confidence in the North Sea for the next one to five years has reached an all-time low, surpassing the worst periods of the financial crisis, oil price decline, or the Covid-19 pandemic.
Companies are preparing for a dire situation potentially worsening, should Labour go through with its promises.
Russell Borthwick, the Chief Executive of the Chamber, expressed concern over the Energy Profits Levy, and the recent plans to expand and prolong it, noting its “chilling effect” on the sector.
“Unless steps are taken in the Budget to address this, then the damaging consequences in terms of future investment activity, employment and the economic future of the North-east Scotland region could be severe,” he said.
“You do not fix financial deficits by putting tens of thousands of people out of work, which is looking increasingly like the outcome we face after October 30.
“The Energy Profits Levy currently appears to be the only “windfall tax” on any sector, anywhere in the world. On the basis that windfall conditions no longer exist and market prices for oil and gas have returned to ordinary levels, Treasury should maintain allowances within the current oil and gas fiscal regime and work towards the swift removal of the EPL entirely.”
Industry body OEUK has predicted that 35,000 direct positions could be lost if the UK Government proceeds with its plans. Investment firm Stifel suggests this number could rise to 100,000, affecting working communities across the UK when considering all jobs supported by the oil and gas industry.
AGCC has proposed a five-point plan to the Treasury which it believes will safeguard jobs in the North Sea.
1) End the Energy Profits Levy by the end of 2025.
2) Refrain from further increases to the Energy Profits Levy.
3) Implement a progressive replacement regime for the Energy Profits Levy early.
4) Establish a definitive end date for the Energy Profits Levy.
5) Capital allowances: full expensing at 78%