Political instability has become the biggest obstacle to the UK’s energy transition, according to a new report from Aberdeen & Grampian Chamber of Commerce, alongside KPMG and ETZ.
Half of the companies (50%) surveyed for the latest Energy Transition report said that the current political and regulatory environment was now a barrier to diversification, up from 24% a year ago.
It follows a summer of chaos at Westminster, which saw four chancellors and three prime ministers oversee two major tax u-turns for the energy sector.
As a result, the industry has been left paying one of the highest levels of corporation tax of any sector anywhere in the world, with reports it could rise further in Thursday’s Autumn Budget.
The 36th edition of the biannual barometer of confidence in the UK’s energy sector revealed that UK energy companies believe 47% of their work will be outwith oil and gas by 2030, while 44% believe they will be more involved in offshore wind within five years, with 70% of firms actively diversifying outwith oil and gas at present.
A further 61% said that access to skills will be one of the defining issues in the year ahead, with a surge in recruitment concerns across all disciplines.
Meanwhile, a quarter of companies claim they will be net zero by 2030, but 34% have yet to commit to a strategy at all.
The long-running survey also makes four recommendations to government.
It seeks a stable fiscal regime for the North Sea, with no expansion of the windfall tax, alongside an extension of the investment allowance to include low carbon technologies.
It also called for measures to accelerate business transition to net zero, and for the UK Government to progress the Scottish carbon capture cluster.
Ryan Crighton, policy director at Aberdeen & Grampian Chamber of Commerce, said: “The clamour for windfall taxes is understandable, but the whole debate has been driven by politicians unwilling to listen the hard truths which lie behind this populist policy.
“The energy transition is going to cost tens of billions of pounds and it is becoming abundantly clear that the UK’s public finances are not in a position to share that bill.
“At a time when oil and gas producers are being asked to invest more to help ensure the UK’s energy security and make longer-term investments in renewables, additional taxes risk undermining their ability to do either.”
Martin Findlay, senior partner at KPMG's Aberdeen office, said: “Net zero remains a non-negotiable for the country, for business and for society.
“The direction of travel is clear amongst oil and gas firms - they are expecting their businesses to transform substantially and at pace across the next decade.
“What companies do now across the three ESG strands of environmental, social and governance will determine the talent they attract, the customers they serve, the profits they make, and ultimately the impact they will have on society.”
Maggie McGinlay, chief executive of ETZ, added: “The ongoing crisis in Ukraine and unprecedented cost crisis has precipitated significant debate around the structural weaknesses in our economy and how to address them.
“As a result, our policymakers are now firmly focussed on achieving greater energy security and supply for the long term as one of the solutions to this volatility.
“The results of this survey reflect this very context and reaffirms that the delivery of energy transition will require investment in strategic infrastructure, technology innovation, supply chain development and skills,“ she continued, adding: “That is exactly what ETZ has been set up to do and, working with partners in government and industry, we are witnessing the active acceleration new energies and a net zero future.“
Don't miss the latest headlines with our twice-daily newsletter - sign up here for free.
