Offshore investment warning over windfall tax rise

The chancellor's decision to raise and extend the windfall tax on profits made by oil and gas firms could drive investment out of the UK, the offshore industry's trade body has warned.

Offshore Energies UK's comments came after Jeremy Hunt announced a rise in the Energy Profits Levy.

The windfall tax is due to increase from 25% to 35% in January.

The Treasury is also extending the profits levy from December 2025 to March 2028.

OEUK claimed the tax rise could also drive up imports and leave consumers more exposed to global shortages.

The levy applies to profits made from extracting UK oil and gas, but not from other activities such as refining oil and selling petrol and diesel on forecourts.

OEUK also criticised plans for a new 45% levy on electricity generators, including offshore wind, from the start of next year.

In a statement, OEUK claimed the tax changes would impact not just North Sea operators but hundreds of other companies in their supply chains across the UK.

It warned that companies, many of which provide specialised services such as marine engineering, deep sea diving or subsea communications, would face cutbacks or be driven abroad, if investment declined.

The offshore industry was paying 40% tax on oil and gas production before the windfall tax was imposed in May.

Since then, it has been paying 65%. The latest rise takes the overall tax rate to 75% from January.

OEUK chief executive Deirdre Michie said the tax changes would "undermine" an industry which generated jobs for 200,000 people.

She said: "We remain proud to pay our taxes, but this latest increase means UK offshore operators will be paying a total rate of 75%.

"This rate is so high that it threatens to drive investment out of the UK altogether.

"The extension to 2028 takes no account of the likelihood of prices falling in that time.

"It's also worrying that we are increasing taxes on low-carbon electricity generation like offshore wind."

She added: "No industry can invest or plan without knowing what kinds of tax regime will be in place. We want to work with the government to build a long-term tax regime that will let us play a full role in the energy transition."

'Damage to reputation'

Scottish Renewables also expressed concern over a new windfall tax of 45% for renewable electricity generators from January.

Chief executive Claire Mack said: "Today's announcement by the chancellor damages this country's reputation as a leader in renewable energy, chiefly by continuing to offer investment allowances to oil and gas extraction while failing to do the same for this industry.

"Additionally, many renewable energy generators on older contracts have sold their power far in advance, so are not benefiting from excess profits from wholesale price rises caused by the cost of gas.

"We would therefore urge the government to ensure that the 45% windfall tax announced today does not unfairly impact these generators which have not been earning increased profits."