Labour’s proposed North Sea tax increases would destroy up to 100,000 jobs energy experts have warned.
Analysts at investment bank Stifel have predicted any increases to UK windfall tax and removal of incentive allowances will mean the loss of jobs and skills in the UK North Sea.
Employee numbers could plummet from 200,000 to 100,000 as quickly as the next general election in 2029.
Labour has come under fire for its plan to extend the windfall tax on oil and gas firms by an extra year until at least 2029 and increase it from 75% to 78%.
The report comes as Labour leader Keir Starmer pledged to import a “proper windfall tax on oil and gas companies” who make excess profits if the party forms the next government.
He also said Labour would create a new publicly owned energy company, Great British Energy, which would invest in clean energy.
North Sea ‘rapid decline’
Stifel said the UK North Sea energy industry could be forced into a rapid decline if there is an increase in the windfall tax or a reduction or removal of investment allowances.
If it was to go ahead it has warned it would result in substantially lower investment – by as much as £20 billion between now and 2035.
This would also result in lower tax income, fewer jobs, loss of skills for the green transition, higher emissions, and the export of jobs, skills and the UK’s energy security to other energy-producing countries.
The report states: “Loss of investment means loss of jobs and skills for the energy transition.
“Given the strong correlation between spending and jobs, the UK North Sea could lose
100,000 of the current 200,000 jobs that directly or indirectly are employed by the
industry, and possibly as quickly as by the next general election in 2029.
“This would harm the skills base needed for the energy transition; for example, the transferable skills between offshore energy, and floating wind farms, carbon capture, and hydrogen production.”
Trade body Offshore Energies UK (OEUK) previously said 42,000 jobs are expected to be lost due to the policy package from Labour, with investment being “wiped out” through the loss of £26bn of economic value.
Loss of income leads to loss of investment
Stifel said its analysis shows an increase in the windfall tax and removal of investment allowances would generate only an extra £6.5bn tax by 2029, not the £11bn that the proposed higher taxes are supposed to generate.
The report adds: “We estimate £20bn lower capital investment between now and 2035 – £30bn lower over the North Sea’s remaining life – as higher tax take renders investment projects uneconomic, which drives North Sea production volumes 50% lower by the end of the decade.”
The updated analysis comes just three months after Stifel warned 2024 will be the final year for spending in the North Sea oil and gas industry.
Chris Wheaton, Stifel managing director for oil and gas, previously warned that the industry is not an “infinite source of revenue” for the exchequer, and there will be consequences on investment, jobs, and energy security if the Labour windfall tax plans come into action.