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Government must act quickly to keep energy suppliers in the UK

Rebecca Groundwater

Rebecca Groundwater

4 min read

In the Chancellor’s autumn statement, the government announced changes to the Energy Profits Levy (EPL), disregarding industry warnings

While the knock-on effects of these changes on supply chain companies – which rely on operators for clear pipeline of projects – wasn’t immediately felt, their future now appears uncertain. 

Since the introduction of the EPL, we’ve seen a potential risk to businesses operating in the United Kingdom. Are we providing enough incentives to encourage them to stay in the UK? What other options are available, and how can we further incentivise them to remain in the country? 

Across the Atlantic, we have the Inflation Reduction Act – the United States’ first major piece of legislation that incorporates climate action investments into the federal tax code. This act invests $158bn into clean energy, extends the solar investment tax credit for a decade, allocates $30bn to nuclear energy, $37bn to advanced manufacturing, and provides $3bn in tax incentives for carbon capture and storage installation in existing power plants.  

The US haven’t been shy about why they are doing this, and they have been successful. We speak to companies who are now considering America as a major growth market, with some already making the move. Many companies are already there – the synergies between the existing oil and gas sector, the presence of the operators who tend to take their supply chain with them, means that it is a huge potential market. 

The EU launched its response in mid-March, the Net Zero Industry Act, concentrating on the wind and battery sectors, assessing their manufacturing potential, and emphasising the need to keep pace given that the current policy framework doesn’t encourage corporate investment. A project turnaround time of 5-10 years isn’t sufficient to inspire a rapid transition. 

The UK’s supply chain is adaptable and enjoys a global reach. It has certainly endured previous setbacks and downturns. However, this time feels different due to the gradual undermining of the oil and gas sector in recent years. While we acknowledge its importance in powering and heating various functions, there seems to be a general sentiment that we can manage without it. Though the supply chain is resilient, when other countries are actively seeking their services, and everything feels challenging, sometimes it is easier for them to seek opportunities elsewhere. 

Is there a way to counteract the US and EU’s push towards achieving net zero? Our message has been consistent; we need to act quickly and in a coordinated manner.

The cost of doing business, Brexit, and energy costs all add up

The energy sector is vast, with diverse technologies, needs, and job requirements, but we don’t approach it systematically and coherently. Our planning system needs attention as it is time-consuming, cumbersome, and possibly incapable of reconciling the need for immediate action versus the checks and balances of planning. We should consider how and why we approach manufacturing capability and local content and what’s realistic. We can’t and shouldn’t try to do everything, that way, we win nothing. Let’s go after what we can excel at – our supply chain will thank us. 

Our supply chain won’t have to hedge their bets and spend money pursuing every opportunity “just in case”. They can serve the UK in the way that best suits them and explore foreign markets when it is appropriate. But we must give them reasons to want to stay in the UK. 

The cost of doing business, Brexit, and energy costs (including office expenses and manufacturing bases) all add up. Let’s have an adult conversation about what we can and can’t do. Let’s talk about what we can change to execute projects more quickly.  

Many of our members throughout the UK no longer look to the government for action or direction, pursuing instead simply what is best for their company. This means that they have little incentive to remain, except for profit margins. If they can obtain work more quickly in other countries and can fulfil their obligations, they will leave.

Rebecca Groundwater is Head of external affairs at the Energy Industries Council (EIC)

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