The government’s announcement to further increase taxes on the profits of energy operators working in the UK - bringing the total levy on net income to 75% - could see energy projects delayed, drive away investments, and as a result, harm many of the UK’s energy supply chain companies, the Energy Industries Council (EIC), said on Thursday (17th November).
Companies already pay 65% tax on their earnings after the government raised the tax rate by 25% in June. Chancellor of the Exchequer, Jeremy Hunt, announced the new levy during his autumn budget statement.
The EIC welcomed, however, the government’s plan to go ahead with the Sizewell C nuclear power plant, which will create 10,000 jobs.
The EIC is UK’s largest energy trade association and one of the world’s biggest with over 800 member companies, covering the entire energy industry, including oil and gas, renewables, nuclear, hydrogen, carbon capture, and power. Medium-sized and small energy supply chain companies make up the vast majority of EIC members.
Mr Hunt said any tax raise on energy businesses should be “temporary, not deter investments, and recognise the cyclical nature of energy businesses”. He said that increasing the levy from 25% to 35% would start from 1st January 2023 to 28th March 2028. He also announced a temporary 45% lax on electricity generators.
“A temporary levy on profits could lead to significant effects on the energy supply chain companies as operators and investors may now look to put on hold projects and possibly redirect their planned investment elsewhere,” said Neil Golding, EIC’s Director of Market Intelligence.
David Clark, Non-Executive Director at EIC’s Board and Chief Executive Officer of Vysus Group, said: “With the changes announced so far, it is clear that the UK energy market will be less attractive to international investors and will likely see further supply chain investment being redirected internationally further weakening the local expertise and capability.”
Nuclear power plant
Mr Hunt said on Thursday that the contracts for the initial investment in the nuclear plant would be signed with companies, including EDF, in coming weeks.
“Government support for Sizewell C is great news for our supply chain companies and will lead to further opportunities for companies working in the sector,” Mr Golding said. “The UK supply chain has been instrumental in developing the Hinckley Point C plant. The announcement made by the Chancellor will ensure that the nuclear supply chain will remain rooted in the UK which will be needed to meet the UK’s future plans for nuclear generation.”
For more information about EIC, please visit: https://www.the-eic.com
With the changes announced so far, it is clear that the UK energy market will be less attractive to international investors and will likely see further supply chain investment being redirected internationally further weakening the local expertise and capability.
David Clark, Vysus Group CEO & Non-Executive Director of EIC’s Board