\n She has a multi-billion-pound fiscal hole and a manifesto pledge not to raise income tax.\n<\/p>\n
\n Borrowing remains higher than forecast. Growth is weak. Productivity is expected to be revised down. And the OBR\u2019s fiscal forecast is likely to give the Chancellor less headroom than she hoped.\n<\/p>\n
\n That is why the fairly mild optimism in the North East about the possibility of reforming the Energy Profits Levy has faded.\n<\/p>\n
\n Just weeks ago, there were reports the Chancellor was considering proposals to scrap the tax<\/a> as soon as next year.\n<\/p>\n \n Politico<\/a> reported that officials had asked oil and gas firms to calculate the value of potential investment if ministers ditched the EPL in 2026.\n<\/p>\n \n But with Treasury figures suggesting the windfall tax will raise billions of pounds next year, that could be too tempting for the UK Government<\/a> to resist.\n<\/p>\n \n There is also the politics<\/a> of it all, one sector boss says. As Labour faces a Green surge south of the border, it is not good optics to ask oil and gas giants to pay less tax while asking workers to accept ‘difficult choices’ elsewhere.\n<\/p>\n \n \n No matter, the sector argues, that this is a false economy; that the windfall tax is now generating lower revenues than first expected; that it is damaging investment and, given that a shrinking sector means more dependence on oil and gas from abroad and losing the skills needed for the just transition, environmentally incoherent.\n<\/p>\n \n It was Rishi Sunak who first announced the windfall tax<\/a> \u2014 set at 65% \u2014 in May 2022 during his time as Boris Johnson\u2019s chancellor. It came after Russia\u2019s invasion of Ukraine led to a surge in wholesale and retail energy prices.\n<\/p>\n \n He always insisted it would be temporary.\n<\/p>\n \n However, after Liz Truss\u2019s mini-budget<\/a>, Jeremy Hunt increased the rate to 75% and extended it for a further two years to 31 March 2028.\n<\/p>\n \n Labour then moved to strengthen the tax after winning last year\u2019s election.\n<\/p>\n \n Effectively, firms in the sector pay Ring Fence Corporation Tax of 30%, a supplementary charge of 10% and the EPL at 38%.\n<\/p>\n \n Put together, these add up to a total tax rate of 78% on North Sea<\/a> profits \u2014 much higher than the standard 25% corporation tax for other companies.\n<\/p>\n \n But it is not just the firms who pay the EPL who are hurting. The supply chain itself is issuing some of the starkest warnings.\n<\/p>\n \n A recent briefing pulled together by the True North consultancy features testimony from six North Sea business leaders. It makes for grim reading.\n<\/p>\n \n \u201cIn Aberdeen<\/a> and across the wider North Sea supply chain, there has already been rapid consolidation of the core customer base, cancelled contracts, and widespread redundancies,\u201d says Peterson Finance Director Christine Dodds.\n<\/p>\n \n \u201cThese are not forecasts \u2014 they are happening now, and the longer uncertainty persists the deeper the damage becomes.\u201d\n<\/p>\n \n She says the 78% tax rate has made the UK \u201cglobally uncompetitive\u201d and is eroding the capabilities needed to deliver the energy transition.\n<\/p>\n \n Ryan Menzies of Apollo Engineering says the industry is in a \u201cfragile\u201d moment.\n<\/p>\n \n The current sunset clause pushes the levy into 2029, with the possibility of ending earlier only if oil and gas prices fall below specified thresholds for a sustained period.\n<\/p>\n \n \u201cThe Energy Profits Levy is far more than just a fiscal issue \u2014 it is a confidence issue,\u201d he says.\n<\/p>\n \n \u201cThe current uncertainty is paralysing investment. An EPL sunset date of 2030, or even 2029, is simply too far away to restore confidence. We need clarity in the Autumn Budget and a firm commitment to replace the tax with something more competitive by the end of 2026.\n<\/p>\n \n “That is the only way to unlock the investment needed to get projects moving again \u2014 across all parts of the energy system.\u201d\n<\/p>\n \n For Port of Aberdeen \u2014 one of the clearest real-time barometers of offshore activity \u2014 the downturn is already measurable. Oil and gas<\/a> traffic is down 10% this year, and a staggering 25% over the summer months when activity should peak.\n<\/p>\n \n \u201cOil and gas jobs are disappearing at a rate of almost 1,000 a month, and new opportunities in renewables are not materialising quickly enough,\u201d warns chief executive Bob Sanguinetti.\n<\/p>\n \n \u201cWe risk being stranded between two energy eras. If we lose the people and skills needed to power energy transition, the opportunity will sail past our shores.\u201d\n<\/p>\n \n David Wilson, Aberdeen Office Managing Partner at Johnston Carmichael, says the “persistent instability and policy ambiguity” is “driving investment overseas at a pace we have never recorded before”.\n<\/p>\n \n Kirstie Langan, director of an Aberdeen engineering firm employing 100 people, added: \u201cWaiting until 2030 or 2028 for reform is not an option. By then, many of the companies that make up the backbone of the UK\u2019s energy transition will have scaled back, restructured or shut down entirely.\n<\/p>\n \n “We need a credible pathway this side of the election cycle \u2014 not promises for the next Parliament \u2014 to keep capital and talent here in the UK.\n<\/p>\n \n \u201cThe upcoming Budget is the Government\u2019s chance to send an unmistakable signal to investors that the UK is serious about growth, jobs and energy security.\u201d\n<\/p>\n \n \n Meanwhile, new analysis from the Fraser of Allander Institute<\/a> (FAI) sets out in sobering detail what an accelerated decline of the North Sea could mean for the UK, Scotland and the North East.\n<\/p>\n \n Working with scenario data from Robert Gordon University\u2019s Energy Transition Institute, the FAI compares two realistic pathways: a \u201cmanaged decline\u201d and a more abrupt \u201caccelerated decline\u201d.\n<\/p>\n \n In both models, capital investment in the basin falls sharply over the next decade, but in the accelerated pathway it collapses by around two-thirds. The consequences are significant.\n<\/p>\n \n Across the UK economy, the difference in gross value added by 2035 is around \u00a313 billion \u2014 the equivalent of 0.5% of GDP.\n<\/p>\n \n But in Scotland, the gap is around \u00a34 billion \u2014 roughly 1.8% of national output \u2014 and in the North East alone, around \u00a31 billion, or around 5% of the entire regional economy.\n<\/p>\n \n This is not theoretical. The FAI notes that after the last major oil price shock in 2015, the North East economy contracted by 13% between 2015 and 2019, while Scotland as a whole grew by 5%.\n<\/p>\n \n By 2023, the region was still around 10% smaller than its pre-pandemic size.\n<\/p>\n \n They also point out that the UK may not see headline spikes in unemployment because many energy workers are shifting abroad.\n<\/p>\n \n However, domestic economic activity, tax receipts and supply chain density quietly show the impact.\n<\/p>\n \n The Scottish Government<\/a> is also asking for change.\n<\/p>\n \n In a letter to the Chancellor, SNP<\/a> Finance Secretary Shona Robison<\/a> has asked Ms Reeves to \u201ccompletely reform the Energy Profits Levy and replace it with a sustainable system, to support jobs and investment across Scotland\u2019s energy sector\u201d.\n<\/p>\n \n Labour sources are quick to point out that the SNP has treated the sector poorly in the past and that in the Scottish Government\u2019s draft energy strategy \u2014 released under Nicola Sturgeon<\/a> in early 2023 but yet to be finalised \u2014 the stated position was a \u201cpresumption against new exploration for oil and gas\u201d.\n<\/p>\n \n \n John Swinney<\/a>\u2019s administration has softened its stance towards the industry, but with the SNP likely needing to rely on Green votes to get their budgets through, and the prospect of a new Bute House Agreement if May\u2019s election is as chaotic as the polls predict, the First Minister<\/a> too may be at the mercy of politics.\n<\/p>\n \n Wednesday\u2019s Budget will not just determine the future of Sir Keir Starmer and Rachel Reeves \u2014 it will set the direction of travel for Scotland\u2019s energy sector.<\/p>\n","protected":false},"excerpt":{"rendered":"\u201cThey don\u2019t have to turn things around on Wednesday,\u201d the MP told the Herald on Sunday, \u201cit just…\n","protected":false},"author":2,"featured_media":279003,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[84,1294,56,54,55],"class_list":{"0":"post-279002","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-uk","11":"tag-united-kingdom","12":"tag-unitedkingdom"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/279002","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=279002"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/279002\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/279003"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=279002"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=279002"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=279002"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Sir Keir Starmer under pressure (Image: PA)\n<\/p>\n
1000s of workers are leaving the sector every month (Image: Serica Energy)\n<\/p>\n
John Swinney’s government is calling for the EPL to be reformed (Image: Damian Shields)\n<\/p>\n