Chancellor’s budget could unlock £50 billion investment and drive reindustrialisation

The Chancellor should use tomorrow's Budget as an opportunity to attract £50 billion investment in domestic energy production and drive reindustrialisation, says Offshore Energies UK.

It is also a one-off chance to boost growth, strengthen energy security and back UK jobs, the oil, gas, offshore wind and carbon capture.

A pragmatic fiscal approach could unlock billions of pounds of private investment in homegrown energy and give businesses the confidence to invest in Britain. It would also provide a major boost to industrial communities across the country.

This would be done by early introduction of a new Oil and Gas Revenue Levy (OGRL) in the 2026 Finance Bill which could be enforced as early as January 2027 as a permanent successor to the Energy Profits Levy (EPL).

The OGRL would provide a more predictable investment regime while ensuring windfall revenues are taxed when commodity prices are high.

The current Energy Profits Levy has a headline tax rate of 78% irrespective of prevailing market conditions. OEUK has warned this is making it harder for internationally mobile companies to secure capital for UK North Sea projects.

OEUK says an early end to the EPL would signal that the UK Continental Shelf is open for investment and support domestic production over imports. Retention of the EPL until 2030 would mean domestic energy production continues to decline at an accelerated rate.

OEUK analysis has identified more than 100 North Sea oil and gas development schemes waiting to be developed. Under the supportive fiscal and regulatory regime proposed by the Treasury's own OGRL mechanism, these projects could between them attract £50 billion of capital investment between now and 2035.

OEUK's submission to the Treasury ahead of the budget, also estimated that nearly £15 billion in additional tax revenues and 1.3 billion barrels of additional domestic oil and gas production would be achieved with this policy change.

This would reduce UK dependence on imported oil and gas which involves greenhouse gas emissions up to four times higher than domestically produced fuel.

At the same time OEUK is calling for continued use of the Contracts for Difference scheme for offshore wind, and reform of the transmission charging system which penalises offshore wind energy developers in remote areas such as Northern Scotland where winds are strongest and most reliable but the generated electricity has to be transported long distances to where it can be used by consumers.

The trade body also wants the government to maintain its commitment to investment in carbon capture and storage to ensure net zero emissions targets are reached.

OEUK Chief Executive David Whitehouse said:

"This Budget is an opportunity to send a clear message that Britain is serious about growth, the energy transition and investment in its own energy future.

"The government has said that reindustrialisation is a key priority. The Budget is an excellent opportunity to show that Britain will support industrial communities and back UK industry, not imports.

"Businesses need certainty to invest. Bringing forward the OGRL to January 2027 would create a permanent framework that taxes windfalls when prices are high while creating the confidence needed to invest when prices are lower.

"But this is about more than oil and gas - Britain needs investment right across its offshore energy mix. Continued support for offshore wind and sustained deployment of carbon capture and storage can help turn our world-class energy expertise into jobs, growth and greater energy security as we confront risks to imported supplies from conflicts around the world.

"The choice for the Chancellor is clear. Back homegrown energy and British jobs and keep more investment here in the UK."

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