Government greenlights Jackdaw gas field

The government has approved plans for gas production at the Jackdaw field in the North Sea, citing energy security and support for jobs.

Gas produced at the site is expected to begin supplying the UK gas network from the end of October, with production forecast to increase domestic gas output by 6% at its peak and operate for up to 11 years.

The announcement came alongside the launch of a new Energy Wealth Fund, which will reportedly use tax revenues from North Sea oil and gas to support renewable and low-carbon energy projects.

Sam Parkin, senior economist at BCIS, said: 'More North Sea gas will not materially reduce energy bills because gas produced in British waters is sold at prices influenced by international supply and demand. Domestic production, therefore, does not necessarily insulate consumers from global price shocks.

'However, while the UK continues to need gas, there is a case for meeting more of that demand from domestic resources. Additional extraction could reduce reliance on imports, support jobs and generate tax revenues to help fund public services and investment.

'These benefits should be weighed alongside the environmental consequences of producing and burning gas, including how domestic supply compares with the imports it could replace.

'For construction, exposure to volatile energy prices continues through materials manufacturing, transport and site operations, and contractors and clients should not assume that Jackdaw will ease current project cost pressures.

'Using domestic resources can sit alongside investment in electricity networks, storage and more energy-efficient buildings. Better infrastructure would help make fuller use of renewable generation and allow developments awaiting connections to proceed, creating construction work and supporting growth.

'Ultimately, energy policy needs to address supply requirements while reducing longer-term exposure to volatile fossil fuel prices and the emissions associated with energy use.'

Energy market volatility associated with ongoing conflict in the Middle East, compounded by low European gas storage levels, has contributed to rising wholesale natural gas prices in recent months. As of 22 October 2026, UK natural gas prices had reached 220 pence per therm, according to the UK National Balancing Point (NBP) Natural Gas Futures benchmark⁽¹⁾.

This represents the highest price recorded in more than two years of available data for the referenced series, with wider market analysis indicating that UK wholesale natural gas prices have reached their highest levels since 2022.

Annual Consumer Prices Index (CPI) inflation reached 3.5% in September 2026, up from 3.1% in August. Motor fuels made the largest upward contribution to the change in the annual rate.

'The rise in CPI inflation to 3.5% reinforces the difficult conditions facing construction ahead of the Autumn Budget,' Parkin added. 'Higher fuel and energy costs feed into materials manufacturing, transport and site operations, adding pressure to projects already struggling with viability.

'Although CPI measures consumer prices rather than construction costs, the underlying energy pressures affect both. With demand weak, contractors have limited scope to recover higher costs through tender prices. Absorbing those increases squeezes margins, while pricing too aggressively to secure work increases exposure to further cost shocks.

'Rising core inflation also complicates the interest rate outlook. Any increase in borrowing costs would create another obstacle for developers and clients assessing whether projects can proceed.'

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