Trade body Offshore Energies UK (OEUK) has called on the UK Government to remove the windfall tax on oil and gas profits by 2026.
It is calling for it be replaced it with a competitive long-term mechanism that responds to future price shocks to encourage what it says is necessary investment in the UK’s energy future.
The call comes as the UK Government’s consultation aimed at developing a predictable response to future price shocks closed.
The Energy Profits Levy (EPL), known as the windfall tax, was introduced in response to a spike in global energy prices in May 2022. It’s an additional tax on the profits made by companies producing oil and gas from the waters off the coast of Britain, with the top rate of tax at 78 per cent.
Independent data from the Office of National Statistics confirms that the profits for those investing in the UK oil and gas sector have fallen to negative levels, but the tax remains, which OEUK says is holding back vital investment across the UK’s energy landscape.
Pointing to the UK’s increasing reliance on imported energy, OEUK said that a pragmatic oil and gas tax regime would deliver more home-produced energy, protect jobs in the industry and across the wider economy, and strengthen the UK’s energy sovereignty.
In 2024, the UK’s total energy production was at an historic low, with over 40% of UK’s energy needs met through imports. Without stimulating investment, the UK could be reliant on imports for the majority of its oil and gas demand by 2030.
OEUK has shown that supportive government policy towards UK oil and gas production increases the likelihood of a successful domestic expansion into other energy forms including floating offshore wind, carbon capture and hydrogen.
OEUK is pressing the UK Government to act in the next Autumn Budget. It’s calling for a mechanism to be introduced in 2026 that responds to price shocks and gives companies certainty to invest long term.
OEUK chief executive David Whitehouse said:
“Last year, the UK was dependent for almost 40% of total energy demand on imported energy, and UK energy prices are higher than many of our counterparts. In an uncertain world that is not the place to be.
“In a country where today 75% of our energy comes from oil and gas, the solution is the responsible production of our own oil and gas from the North Sea, alongside the build out of renewable energy. It should not be a debate about one form of energy versus another – we need it all.
“We welcomed the Government’s decision to launch this fiscal consultation and we’re engaging constructively in the process.
“The sector needs action now to secure jobs, boost energy security, and build for the future. That means a commitment from government to deliver a mechanism in 2026 that creates a predictable response to future price shocks.
“This is what is needed to unlock investment in UK energy – oil, gas, renewables, hydrogen, and carbon capture.
“The North Sea is a strategic national asset that has powered the UK economy and homes through for the past 50 years and it is only right that it is managed as such.”
