Aberdeen & Grampian Chamber of Commerce (AGCC) has warned UK finance minister Rachel Reeves that 100,000 jobs rest on her sparing businesses operating in the North Sea from “another damaging tax raid.”
AGCC warned prior to the UK General Election that the new government had 100 days to save 100,000 jobs by restoring confidence among investors in the UK oil and gas industry.
Now, more than 100 days on from Labour’s election victory, AGCC said new research shows “a sector in crisis.”
AGCC said its 40th Energy Transition Survey – sponsored by KPMG and ETZ Ltd – shows that confidence in the North Sea over the next one to five years is at an all-time low, far worse than at any point during the financial crisis, oil price crash or during the Covid-19 pandemic.
“Worryingly, firms are braced for a desperately bleak situation going from bad to worse, if the Labour government goes ahead with its pledges,” said the chamber.
AGCC CEO Russell Borthwick said the Energy Profits Levy, and recently-announced plans to increase and extend it, are having “a chilling effect on the sector”.
Borthwick said: “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.
“You do not fix a grave economic situation 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 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 forecast that 35,000 direct jobs could be lost if the UK Government proceeds as planned.
AGCC said investment bank Stifel believes this figure could hit 100,000 in working communities across the UK when all jobs supported by the oil and gas industry are considered.
AGCC has proposed a five-point plan to the UK Treasury which it believes will protect jobs in the North Sea:
- Remove the Energy Profits Levy by the end of 2025
- Resist further increases to the Energy Profits Levy
- Early implementation of a progressive successor regime to the Energy Profits Levy
- Set a binding sunset clause for the Energy Profits Lev
- Capital allowances — full expensing at 78%
AGCC said: “In just over two weeks we’ll find out if the Government has been listening to the trade unions, businesses, investors and academics or whether it chooses to extend and increase the Energy Profits Levy.
“Even if it does so, the principle of full expensing must at least be maintained, given the central role that the North Sea energy sector plays in delivering energy security and investing in the transition.
“Failure to protect this would place the sector at a comparative disadvantage to other sectors and hinder the UK’s net zero ambitions.”