UK’s business climate faces turbulence as energy tax policies raise alarm.
- The Energy Profits Levy set to increase from 35% to 38%, impacting UK oil and gas firms significantly.
- Projected job losses and investment declines fuel concerns over the economic future.
- OEUK warns that extended taxes could cost the economy £12 billion despite initial revenue gains.
- Business sentiment declines as upcoming policies cast uncertainty over the UK’s economic landscape.
The United Kingdom’s business climate is experiencing growing instability as discussions surrounding the Energy Profits Levy (EPL) intensify concerns within the oil and gas sector. Set to rise from 35% to 38% on 1 November, this levy will bring the total tax rate on profits to a staggering 78%. Initially introduced as a temporary measure in response to soaring energy prices, the extension of the EPL until 2030 is expected to substantially impact business operations and investment strategies.
The government’s approach also includes tightening investment allowances, which have functioned as a relief mechanism for businesses investing in North Sea projects. The Offshore Energies UK (OEUK) critiques these changes, projecting a severe economic impact. The industry body anticipates that the increased tax burden could hinder growth, with a projected drop in investment from £14 billion to £2 billion by 2029, potentially jeopardising approximately 35,000 jobs.
David Whitehouse, OEUK’s Chief Executive, has publicly expressed apprehensions, stating, “This is a government that has made economic growth its main priority and yet our analysis shows that its policy will ultimately reduce this sector’s contribution to the UK economy.” Such statements underscore the sector’s anxiety over the evolving fiscal landscape.
The government, however, remains committed to its strategy. A Treasury spokesperson reiterated intentions to maintain a ‘constructive dialogue’ with the industry, aiming for a phased transition in the North Sea. They advocate that the planned National Wealth Fund and Great British Energy initiatives will create new employment opportunities in burgeoning sectors.
Business confidence is not only affected by these tax increases but also by uncertainties related to employment rights adjustments and other policies. Anna Leach, Chief Economist at the Institute of Directors, highlighted the downturn in confidence, noting a steep fall in the Directors’ Economic Confidence Index. She emphasized the need for a stable policy framework to foster an environment conducive to investment and growth.
The Confederation of British Industry (CBI) echoed these sentiments, stressing the importance of outlining a clear tax roadmap and reducing business costs to drive sustainable growth. Alpesh Paleja, CBI’s Interim Deputy Chief Economist, described the current business landscape as ‘very mixed’, with a need for reforms like the long-awaited business rates adjustment to provide clearer guidance for future investments.
The UK’s economic future hangs in balance as business confidence dwindles amidst fiscal uncertainty and policy reform debates.
