A drilling rig in the UK. Credit: Stock87 via Getty Images.

Offshore Energies UK (OEUK), a representative body for the UK offshore energy industry, has warned in its 2024 Business and Supply Chain Outlook report that without a stable energy policy and a globally competitive tax regime, the UK may fail to capitalise on the potential £450bn growth in the domestic offshore energy market by 2040.

The report shows that oil and gas projects have the potential to generate £145bn for the UK’s supply chain. New offshore wind farms across the UK could result in £260bn worth of work, while new hydrogen projects are estimated to bring in £25bn and carbon capture and storage (CCS) technology £34bn.

“With the right conditions, the UK offshore energy sector has the potential to tap into a lucrative global export market valued at over £1 trillion in the next 15 years, creating numerous job opportunities and generating billions in revenue for the UK economy,” the OEUK said in the press release. 

It said this potential hinges on leveraging the UK’s oil and gas legacy and attracting the necessary private investment to sustain the country’s current energy industry and its highly skilled workforce.

OEUK’s CEO David Whitehouse said: “We are in a global race for investment, and UK energy companies need supportive long-term policies, a stable tax regime and responsible rhetoric from all sides.”

OEUK told journalists in a briefing that the Labour Party’s plans for the oil and gas industry could see the UK “move towards being uninvestable”, citing “big challenges” related to licensing and taxation.

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“We’re seeing tax changes, with further tax changes being proposed by Labour if they’re to be elected. This all comes together with some other challenges too to make it a really difficult investment environment in the UK,” OEUK’s market intelligence manager said, as reported by the Independent.

In February, Labour announced its plans to implement a “proper windfall tax” on oil and gas companies if elected. This tax would generate £10.8bn over five years, which would be allocated to green investment.

The party plans to raise the government’s current windfall tax rate from 75% to 78% and extend the levy by one year, until 2029, to help fund its new pledge to increase green spending by £23.7bn over five years.

“Based on the limited information provided by Labour, OEUK has warned this will likely result in no new investments being made in UK oil and gas projects with the impact being felt immediately,” the OEUK said in a statement.