North Sea Job Losses Prompt Calls to Scrap Windfall Tax

Business leaders have called for the windfall tax on oil and gas firms to be scrapped, asserting that 25,000 jobs have been lost since the current administration took power. A report from the North Sea Transition Taskforce suggests that the plan to phase out the energy profits levy (EPL) must be expedited to avert a "disorderly decline" within the industry.

The report warns that without prompt action, jobs will disappear faster than new roles in renewable sectors, such as wind farms, can be created. Philip Rycroft, chairman of the taskforce, stated, "The fundamental problem is that the traditional energy economy is declining faster than the new one is being built." He added, "If we allow that gap to widen further, we will lose skilled people, businesses and infrastructure which cannot simply be recreated when new industries are ready to expand at scale."

The taskforce, which has the backing of the British Chambers of Commerce (BCC) and the Aberdeen and Grampian Chamber of Commerce, indicated that the oil and gas industry supports 115,000 jobs directly and through its supply chains. However, this represents a reduction of 25,000 jobs since the last election, with the impact of job cuts being "particularly acute" in northeast Scotland, a region where one in four individuals is employed in the offshore energy industry. Approximately 80 percent of the industry remains focused on oil and gas.

Companies are reportedly facing difficulties due to the windfall tax, initially introduced by the previous government and subsequently increased under the current administration. The EPL, levied on top of standard tax rates, results in operators paying 78 percent of their profits in taxes. This has been identified as a factor contributing to reduced investment and job losses in the North Sea, and is cited as a reason for energy giant BP's announcement this summer regarding its plan to exit the region after six decades.

The government has planned to replace the EPL with a tax applicable only during periods of high prices, effective from 2030. However, the taskforce's report advocates for this transition to be moved forward to 2027. Industry analysis suggests that such a move could stimulate up to £50 billion in private sector investment and generate over £13 billion in tax revenues over the next decade.

The report emphasizes the importance of maintaining a domestic energy industry to safeguard jobs and the skills necessary for future energy systems, while also reducing Britain's reliance on imports and mitigating exposure to global supply disruptions. It posits, "The choice is not between oil and gas and a clean energy future, but between a managed transition that retains jobs, investment and industrial capability, and a disorderly decline in which they are lost before replacement industries are ready."

Shevaun Haviland, director general of the BCC, commented, "Moving to a stable and competitive regime from 2027 would give businesses confidence to invest, protect highly skilled jobs and help retain billions of pounds of economic activity in the UK." Russell Borthwick, chief executive of Aberdeen and Grampian Chamber of Commerce, added, "Jobs and investment are being lost right now. We have always championed the transition, but it has to be a transition in reality rather than just in name. That means protecting the skills, businesses and supply chains we already have while creating the conditions for new industries to grow."

The report also criticizes the current administration for delays in approving major new North Sea oil and gas fields, such as Rosebank and Jackdaw, despite a perceived shift in its public stance towards the industry.