Foreign investment in UK energy projects halves in a year

Foreign investment in Britain’s energy sector has plunged to a 12-year low after the number of foreign-funded projects halved to just 27 last year, according to EY. High costs and continued political uncertainty are driving international investors away from North Sea oil and gas.

Data published by EY reveals that overseas appetite for British energy projects has collapsed dramatically. Just three foreign-funded projects were approved in oil and gas last year, down sharply from 16 the previous year. The slump coincides with ongoing restrictions on new North Sea drilling and the maintenance of a heavy windfall tax on operator profits.

A broader survey of foreign investors conducted by EY identified Britain’s high energy costs as the single biggest deterrent for international capital. Investors also raised concerns regarding political stability, high labour costs, and an uncertain economic outlook covering growth, interest rates, and public debt.

Annie Graham of EY noted that the Government must bolster and diversify domestic energy sources to maintain foreign investment. She stated: “With high energy costs for business continuing to be a key concern for international investors, initiatives to encourage greater domestic energy production are also welcome and should help to improve price competitiveness in the UK energy market.”

Almost a quarter of survey respondents suggested government efforts should concentrate on reducing energy prices, while 20 percent advocated for simplifying and cutting taxes. Meanwhile, industry leaders remain braced for potential tax increases in the upcoming Budget, with speculation mounting over whether Chancellor John Healey will extend or increase the windfall levy beyond its current framework.

Robin Allan, chairman of the Association of British Independent Exploration Companies, criticised potential tax hikes, telling The Telegraph that extending or increasing the levy on oil and gas companies “would be acts of economic madness” and would further damage a fragile domestic industry.

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p class=”source-link”>Original source: Read the full report at The Telegraph