The UK Government will unlock more than £50billion of North Sea investment and protect 160,000 jobs if it moves to end the windfall tax in 2026.
However, Chancellor Rachel Reeves is being warned that North Sea output will fall by around 40% by 2030 if she fails to reform the Energy Profits Levy next week, placing tens of thousands of working people at risk of redundancy.
The 42nd Energy Transition Report – published today by Aberdeen & Grampian Chamber of Commerce – shows that confidence in the UK Continental Shelf (UKCS) is now at a historic low, with companies moving investment overseas at a pace not seen in the report’s 21-year history.
Despite the UK’s stated ambition to lead the energy transition, the report shows that activity across renewables, electrification and decarbonisation technologies remains flat – and companies warn that the current trajectory could permanently undermine the UK’s ability to deliver net zero using domestic supply chains.
Key findings from the report – which was launched in Aberdeen this morning alongside sponsors D2Zero and Johnston Carmichael – show:
- One in three companies expect to reduce their North-east Scotland workforce within five years.
- 42% of forecast 2026 revenue is expected to come from outside the UKCS as firms divert activity to markets such as Norway, the US and UAE.
- Exploration and production activity remain at record lows, while the value of renewables and decarbonisation projects has also declined.
- Strong cross-sector agreement that ending the EPL early would unlock investment, protect jobs and increase tax revenues.
Earlier this month it emerged that no new oil wells will be drilled in the British North Sea this year for the first time since 1964, despite North Sea Transition Authority (NSTA) projections that the basin could still yield 15.8 billion barrels of oil and gas.
Despite the slowdown, industry estimates that the Chancellor could generate £10billion in additional revenue over the next decade by moving to a competitive policy landscape for North Sea investors.
Russell Borthwick, Chief Executive at Aberdeen & Grampian Chamber of Commerce, warns that the UK is “running out of time to restore confidence.”
He said: “The Energy Profits Levy is choking off investment and making the UK uncompetitive. The Chancellor now has a one-week window to show global investors that Britain is serious about the net-zero transition and backing home-grown industry.
“Removing the EPL in 2026 and replacing it with an internationally-competitive fiscal regime is essential to protecting jobs, unlocking investment and stopping the drift overseas. You cannot deliver net zero, energy security and economic growth by exporting your industrial base.”
The report makes four recommendations:
- Replace the Energy Profits Levy (EPL): The Government should end the EPL in 2026 and introduce a stable, internationally competitive fiscal regime that only taxes genuine windfall profits.
- Level the playing field on imports: The UK should ensure that all energy consumed domestically - whether produced in the North Sea or imported as LNG - is subject to consistent fiscal and environmental standards.
- Deliver a bold Allocation Round 7 (AR7): The UK must maximise the 6.7GW of Scottish offshore wind eligible for AR7 to restart stalled project delivery, protect supply chain capability, and accelerate renewable job creation.
- Manage co-location in a crowded North Sea: Government should create an integrated regulatory framework to coordinate offshore wind, CCS and oil and gas activity, avoiding conflicts and reducing project delays and costs.
Nicola MacLeod, General Counsel & Head of Corporate Affairs, D2Zero, said: “Our sector is standing at a crossroads, and this report makes clear that the window for action is narrowing. Confidence in the UK Continental Shelf has fallen to historic lows, with investment increasingly diverted to countries that offer stability, predictability and a clear vision for the future.
“Yet the opportunity in front of us is enormous. The companies who built the North Sea are the same companies who will decarbonise it, but only if the UK chooses to compete. With a stable fiscal regime, accelerated grid and consenting reform, and a just transition that supports our people and supply chain, this region can continue to power the UK’s energy story for generations to come.”
David Wilson, Aberdeen Office Managing Partner, Johnston Carmichael said: “This year’s survey finds an industry that is despondent but not defeated. Persistent instability and policy ambiguity are driving investment overseas at a pace we have never recorded before, even though the UK has the capability, the expertise and the supply chain strength to lead the energy transition.
“Production and exploration are falling sharply while transition activity grows, yet businesses cannot commit without clarity. Ending the Energy Profits Levy early, restoring fiscal stability and providing a long-term framework would unlock investment, protect skills and keep the UK competitive at a critical moment. The challenge is confidence - and the forthcoming Budget is an opportunity to restore it.”