Confidence in the North Sea has plunged to an “all-time low”, as concerns mount in the north-east of Scotland over the impact of plans by the new Labour Government to increase and extend the windfall tax on oil and gas companies.

The 40th Energy Transition Survey, published today by Aberdeen & Grampian Chamber of Commerce, has found firms’ confidence in the North Sea over the next one to five years has plummeted a level lower than at any point during the financial crisis of 2008 and 2009, the oil price crash which began in the latter part of 2014, or the Covid-19 pandemic.

And the Chamber warns that companies are braced for a "deeply bleak situation going bad to worse", with chief executive Russell Borthwick declaring that Sir Keir Starmer’s plans for the energy profits levy are having a “chilling effect on the sector”.

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The levy was introduced by the previous UK Government in May 2022 in response to the extraordinary profits that North Sea oil and gas companies began to make in the aftermath of Russia’s full-scale invasion of Ukraine, which caused global gas prices to spike.

After taking power in July, the Labour Government pledged to increase the rate of the levy to 38% from 35% from November, lifting the headline rate of tax on upstream oil and gas activities to 78%. It also plans to extend the period over which the levy applies to March 31, 2030, and remove some of the investment allowances originally brought in alongside the tax.

AGCC warned before this year’s general election that the new government would have 100 days to save 100,000 jobs by restoring investor confidence in the UK oil and gas industry. Now, little more than 100 days after Sir Keir Starmer swept to power, the Chamber says its latest research has revealed “a sector in crisis”, stating that 100,000 jobs rest of Chancellor Rachel Reeves sparing firms from “another damaging tax raid”.

"Unless steps are taken in the Budget to address this, then the damaging consequences in terms of future investment activity, employment and the economic future of the north-east Scotland region could be severe," Mr Borthwick said.

“You do not fix a grave economic situation by putting tens of thousands of people out of work, which is looking increasingly like the outcome we face after October 30.

"The energy profits levy appears to be the only “windfall tax” on any sector, anywhere in the world. On the basis that windfall conditions no longer exist and market prices for oil and gas have returned to ordinary levels, [the] Treasury should maintain allowances within the current oil and gas fiscal regime and work towards the swift removal of the EPL entirely."

AGCC has proposed a five-point plan that it believes will protect jobs in the North Sea, which includes removing the energy profits by the end of 2025 and resisting further increases to it.