The head of Britain’s main business organisation has urged Labour to rethink its plan for a new tax crackdown on North Sea oil and gas producers.
Rain Newton-Smith, chief executive of the Confederation of British Industry (CBI), said the policy could have a “chilling” impact on investment decisions and she would seek dialogue with ministers.
Meanwhile, David Latin, chairman of North Sea producer Serica Energy, said he feared the Labour plan could kill the North Sea’s “golden goose”.
The comments came as business leaders digested the shock of the party’s landslide election victory, with the city so far largely calm about the change of government after a prolonged charm offensive by Keir Starmer and Chancellor Rachel Reeves.
This caused little ripple effect on the FTSE 100, which fell 0.5 per cent, or 37.33 points, to 8203.93, although the more domestically focused FTSE 250 rose 0.9 per cent, or 176.31 points, to 20786.65.
Agenda: Rain Newton-Smith said the removal of North Sea tax breaks was an “area of concern”
Newton-Smith urged Labour to “hit the ground running” on planning reform and grid improvements she said were needed “to get the economy up and running”.
But there have already been signs of unease about some of the party’s policies, including the tax status of non-domiciled residents and workers’ rights, as well as fears that Reeves could raise capital gains tax in an attempt to balance the books.
North Sea oil producing companies have already been hit with a windfall tax under the Conservative government, meaning they pay a 75 per cent rate on profits until 2029. But that blow has been softened by a tax break for companies that make investments.
The Labour Party wants to raise the tax rate to 78% and remove the tax break. It also plans to stop granting licences for oil and gas exploration. Some analysts fear that up to 100,000 jobs could be lost.
Newton-Smith told the Mail the removal of North Sea tax breaks was an “area of concern” given the need for oil and gas companies to invest in the shift to renewable energy generation.
‘Labour must listen to business to ensure any changes to capital allowances do not have a chilling effect on investment in renewable energy, energy efficiency and carbon intensity in extraction.’
The windfall tax already wiped out most of producers’ profits last year, prompting some to cut investment and eliminate hundreds of jobs.
Serica’s Latin said that without clarity, investment and taxes in the sector would fall rapidly. He added: “There is this misunderstanding that somehow we are a goose that lays golden eggs and we will continue to lay eggs. But if we don’t feed the goose with investment dollars, it will collapse and there will be no more eggs.”
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