£50 billion going down the drain as UK keeps oil & gas windfall tax in place

As the dust continues to settle over the United Kingdom (UK) government’s decision to retain the energy profits levy (EPL), known as the windfall tax on oil and gas profits, Britain’s trade body for the offshore energy industry, Offshore Energies UK (OEUK), has expressed its dissatisfaction with the move it portrays as a bitter blow to the UK’s energy workers and industry players.

The windfall tax, introduced in response to a spike in global energy prices in May 2022 as an additional tax on the profits made by companies producing oil and gas from the waters off the coast of Britain, has been a bone of contention for some time, as it is now set at 78%. 

The tax continues to be enforced despite data from the Office of National Statistics showing a fall to negative levels in the profits of companies investing in the UK oil and gas sector. OEUK is convinced that the tax is holding back vital investment across the UK’s energy landscape. 

As a result, Offshore Energies UK is adamant that the government should remove the windfall tax on oil and gas profits by 2026 and replace it with a competitive long-term mechanism in response to future price shocks to encourage investment in the country’s energy future.

A lot of hope has been placed in the Autumn Budget to right the wrongs of the past and remove the EPL, but things did not play out the way Big Oil hoped. With this in mind, OEUK has condemned the government’s decision to reject the replacement of the energy profits levy in 2026.

Offshore Energies UK is of the opinion that the decision will end up preventing £50 billion (approximately $66 billion) from being secured in investments, as companies will seek other playgrounds that are more profitable.

David Whitehouse, OEUK’s Chief Executive, highlighted: “Today, the government turned down £50 billion of investment for the UK and the chance to protect the jobs and industries that keep this country running. Instead, they’ve chosen a path that will see 1,000 jobs continue to be lost every month, more energy imports and a contagion across supply chains and our industrial heartlands.

“This is not over. We will keep pressing for change – this industry’s people, their communities and the value of this strategic national asset are too important to dismiss. The Government was warned of the dangers of inaction – they must now own the consequences and reconsider.”

According to Britain’s trade body for the offshore energy industry, this move will cost tens of thousands of jobs, cripple investment, and undermine Scotland and the UK’s energy security. However, OEUK has no intention of giving up and will now meet its 450 member companies for urgent talks.

This meeting will include operators, contractors, and supply chain firms working across oil and gas, wind, hydrogen and carbon capture projects, all deemed to be critical to the UK’s energy future, supporting the livelihoods of over 200,000 people whose jobs are said to be facing growing risk as Britain turns to imported energy to meet demand.

Offshore Energies UK is also seeking an immediate meeting with the Chancellor to explore every possible option to reverse this policy, as a way to prevent what it describes as further economic and industrial damage.

Whitehouse emphasized: “The future of North Sea energy depends on investment, which won’t come without urgent reform of the windfall tax. If the levy stays in place beyond 2026, projects will stall and jobs will vanish, no matter how pragmatic licensing policy becomes. Fixing this outdated tax is the key to unlocking billions in investment across the UK’s entire energy mix.

“Waiting four years for reform of this tax is too late. The North Sea continues to be one of the least competitive places for our industry in the world. We put forward a pragmatic plan: a reformed, permanent windfall tax in exchange for billions in UK investment, more tax paid, and jobs sustained. Government said no.”

Since the government acknowledges Britain needs oil and gas for decades to come, as renewables roll out, with 75% of the UK’s energy still coming from oil and gas, and 10-15 billion barrels being required by 2050, OEUK has shown how half of this amount could be produced at home with tax reform in tandem with a pragmatic approach to licensing.

Otherwise, the offshore energy industry’s trade body is convinced that imports will continue to rise as jobs, projects, and investment move overseas. Offshore Energies UK is reviewing both the full details of the Autumn Budget and the government’s latest guidance on licensing, and the Future of the North Sea consultation outcome.

This is in line with OEUK’s previous efforts, as it has consistently advocated for a pragmatic outcome on licensing, given that no new exploration wells were drilled in 2025 and domestic oil and gas production not only fell by 40% in the last five years but is also on course to halve again by 2030.

Neil Gordon, Chief Executive of Global Underwater Hub, pointed out: “Following months of calls from industry, there will be disappointment that the energy profits levy has been maintained. Without even providing short-term certainty for the Treasury, it fails to offer much needed stability for industry at a time when organisations need to plan and invest.

“However, the announcement in the North Sea Future Plan of a strategy to encourage new subsea tiebacks as part of existing fields and infrastructure has the potential to provide a much-needed boost to the UK’s subsea supply chain. This development is something that Global Underwater Hub, on behalf of its members, has advocated the UK government for over the past year and we welcome its inclusion in the plan and hope it can restore industry confidence.”

In Offshore Energies UK’s view, this situation is an accelerated decline driven by government policy, not geology. OEUK’s plan outlines that putting homegrown energy at the core of its strategies will deliver £200 billion investment this decade alone in UK offshore energies, support supply chain firms as well as operators and developers to win new work in offshore wind, carbon capture and storage (CCS), and hydrogen, as well as oil and gas.

Aside from this, such a step is anticipated to add £150 billion of value to the economy and support 200,000 jobs through backing the responsible production of an additional 3 billion barrels of domestic oil and gas while meeting the UK’s climate goals.

Many companies are now considering their options, as illustrated by Chris Cox, Serica’s CEO, who stated: “While the Budget announcements yesterday were a missed opportunity to kick-start investment across the UK North Sea, we now have greater clarity about the fiscal and regulatory regimes in which our investment decisions will be made.

“We have multiple, and material, organic growth options, and we will work to high-grade the investments that maximise shareholder value.”

Power Your Brand With Offshore Energy ⤵️

Take the spotlight and anchor your brand in the heart of the offshore world!

Join us for a bigger impact and amplify your presence at the core hub of the offshore energy community!

ADVERTISE on Offshore-Energy.biz