Labour’s tax raid on UK oil and gas companies will drive investment overseas and cost the country £13bn, new analysis suggests.
A report from industry trade body Offshore Energies UK (OEUK) said plans to further increase the windfall tax on oil and gas profits and scrap tax breaks would virtually halt all further investment into the North Sea.
The changes will cause “a reduction in capital investment from £14bn to £2.3bn from 2025 to 2029”. This would mean “a reduction of £13bn in the total economic value of the sector from 2025 to 2029,” OEUK said in its report.
The calculations were based on individual asset and project data from across the North Sea, looking at which developments would become unprofitable under the new regime.
New levies – drawn up by Rachel Reeves, the Chancellor, and Ed Miliband, the Energy Secretary – will see North Sea oil and gas producers paying 78pc tax on profits from November. This is the highest rate of any UK sector.
Additionally, operators face being stripped of vital tax allowances, which let companies subtract the cost of the huge investments needed to find new oil and gas from the tax paid on profits.
David Whitehouse, OEUK chief executive, said: “The Prime Minister has said that the Budget will be painful… but this is a Government that has made economic growth its main priority. Our analysis shows that its policy will ultimately reduce this sector’s contribution to the UK economy.”