UK offshore energy supply chain firms warn about impact of windfall tax and call for sector representation on industrial strategy council

n an open letter (released in full below) more than 40 organisations said the confirmed 3 per cent increase to the Energy Profits Levy (EPL) to take the headline rate to 78 per cent, extension to 2030 and the removal of the investment allowance and a reduction in capital allowances risks thousands of jobs, and the companies critical to the UK Government’s industrial strategy and progress towards its net zero targets.

The signatories include manufacturing, engineering and technology companies with a broad footprint of offices and workshops across the whole of UK, employing tens of thousands of people whose jobs depend on oil and gas, wind, hydrogen and carbon capture projects.

In the letter issued by Offshore Energies UK (OEUK) — representing more than 400 companies — the signatories urge the new government to demonstrate its commitment to working in partnership by inviting the sector to join the Industrial Strategy Council and Supply Chain Task Force. This partnership with the sector will realise the full benefits of a homegrown energy transition, supported by jobs, skills and companies anchored in the UK. The letter also explains why the supply chain is concerned and impacted by the EPL, which is a tax paid by operators.

OEUK has identified £200 billion in private domestic ready to support the wider energy transition through domestic offshore wind, carbon capture and storage, and hydrogen that could be unlocked by more globally competitive policies for the sector.

Excerpts from the joint letter issued to Sarah Jones, Minister of State for Industry and Decarbonisation are provided below:

“We look at proposals to increase the EPL; extend its term; and reduce the rate of capital allowances with grave concern that these would be a blunt response which could undermine the levers to long term solutions and jeopardise jobs in communities across the UK.”
“For our companies, this surprise risks operators – big and small – further scaling back or postponing their investment plans in response. The ramifications will be felt throughout the supply chain, through jobs, and the communities this industry supports, both directly and indirectly.

“Time is running out to get this right. The role of the sector and its supply chain companies must be recognised with representation on the industrial strategy council and the supply chain task force. It is vital that the new government demonstrates actual commitment to working in partnership with the sector to secure continued investment and to deliver on promises to safeguard jobs.”
Commenting, David Whitehouse, CEO, Offshore Energies UK says:

“Supply chain companies are the backbone of the UK’s offshore energy industry and have powered the country for last 50 years.

“To harness the full potential of these world class UK companies for the next 50 years there is no simple choice between oil and gas or renewables. The reality is that we will need both to support these companies, power the country and grow the economy.

“This letter shows the level of concern felt by supply chain companies about the government’s new tax proposals. It also shows a clear desire to be represented in the task forces and councils determining industrial policy.

“If oil and gas operators scale back activity as a result of the proposed changes to the Energy Profit Levy, it has a direct impact on our world class supply chain. The impact of the EPL changes will be felt much more widely than oil and gas operators who pay the tax directly.

“We will rely on these British firms of all sizes to deliver a homegrown energy transition, which is the path to economic growth, energy security and net zero. The government has committed to working in partnership with industry, it is vital this sector is represented in the groups determining industrial policy and that the Government appreciates the impact that their proposed tax changes will have on the supply chain, which is responsible for most of the 200,000 jobs supported by this sector.