OEUK warns Sunak to avoid windfall tax trap

Trade body OEUK has warned the UK's chancellor of the exchequer that a windfall tax on oil and gas would deter upstream investments on the UK continental shelf, hours after parliament voted down a proposal from the opposition Labour party.

A counter-proposal to the Queen's speech had suggested a one-off levy would help the UK tackle rising living costs. No backbenchers from the governing Conservatives voted for the measure, but there is speculation the chancellor Rishi Sunak is facing internal pressure privately.

UK offshore oil and gas companies pay double the tax burden generally demanded of UK businesses, typically giving up 40% of their income, OEUK said. An additional €5bn could be raked in from IOCs, compared with estimates produced by the Treasury last October, as tax receipts increase in line with rising prices.

Offshore Energies UK's external relations director, Jenny Stanning, said a windfall tax risked harming investment, domestic energy security and home-grown jobs in the industry.

"It is essential we are able to attract investment into North Sea projects to support the UK's energy security and the energy transition," she said. "That has been challenging even with a stable fiscal regime so it is incredibly important that we maintain investor confidence now.

"A windfall tax risks harming investment, which would lead to less home-produced energy, a drop in investment into green energies and a big hit to jobs."