Chancellor Rachel Reeves is considering scrapping the North Sea windfall tax a year earlier than planned, amid mounting pressure from the oil and gas industry and warnings of falling investment and job losses.
Industry group Offshore Energies UK claims the tax “is costing 1,000 jobs a month and risks pushing investment overseas.” Chief executive David Whitehouse argued, “A stable long-term fiscal regime could unlock £40bn of investment across 90 projects”.
The controversial Energy Profits Levy, introduced during the 2022 energy crisis, raised the tax on North Sea producers to 78%. The move to end it early – potentially by March 2029 rather than 2030 – would reverse last year’s extension and is being weighed against the Office for Budget Responsibility’s warning of a “25 per cent drop in investment and up to a 9.2 per cent fall in output,” if the tax continues.
Treasury officials are now seeking concrete commitments from major operators like BP and Shell that any tax cut will deliver new North Sea investment and jobs: “We are engaging with industry to ensure any future regime is both predictable and provides certainty,” said a Treasury spokesperson.
Looking ahead, the coming months will be crucial for the future of the North Sea energy sector. An early end to the windfall tax could prove a turning point, offering a lifeline for jobs, unlocking billions in much-needed investment, and restoring confidence for both operators and their supply chains.
However, with the Treasury balancing short-term fiscal needs against long-term economic growth, and seeking concrete commitments from industry, the final outcome will depend on whether government and business can strike a deal that truly delivers for workers, communities, and the UK’s wider energy ambitions.
