There should be no tax breaks in the budget for profiteering UK energy companies

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By End Fuel Poverty Coalition

Energy giants have pocketed over £125 billion in profits on their UK operations since the energy crisis started according to an analysis of company reports.

Around £40bn has been taken in profit in the UK by just 27 energy firms in the last two years, yet there are continued calls from energy industry lobbyists to axe the Windfall Tax in the next Budget.

Researchers working for the End Fuel Poverty Coalition examined the declared profits of firms ranging from energy producers (such as Equinor, Shell, RWE) through to the firms that control our energy grid (such as National Grid and UK Power Networks) as well as suppliers (such as British Gas) and energy trading firms (e.g. Vitol and Glencore).

The total profits generated globally by the firms since 2020 stand at over half a trillion pounds, with over four-fifths (£466bn) generated by firms with extensive involvement in the gas industry. 

This is despite the fact that the gas sector will no longer be able to meet heating demand using only domestically extracted gas by 2027 and as just 14% of the North Sea reserves are now commercially viable according to official statistics. 

Further analysis shows that as households face a fifth winter of sky-high energy bills, over £50bn of the profits over five years are generated by electricity and gas transmission and distribution firms. 

These are the “network costs” consumers pay for maintaining the pipes and wires of the energy system and are usually paid for through standing charges on energy bills. The firms were recently criticised in a report by the House of Commons Energy Security & Net Zero Committee.

Simon Francis, coordinator of the End Fuel Poverty Coalition, commented: “Energy firms continue to post multi-billion pound profits while millions of households struggle to afford to heat their homes. The figures equate to £878 per household, per year in profit. At the same time, average annual energy bills have soared from £1,042 in 2020 to £1,755 today, after peaking even higher in early 2023.”

“Even after the temporary windfall tax, oil and gas giants have benefited from exceptional earnings driven by global price spikes, which stands in stark contrast to record energy debt and record levels of fuel poverty. The Chancellor must resist pressure to provide a tax cut to the energy industry in the budget and ensure that the system captures excess industry profits fairly and directs revenues to protect vulnerable households and improve the energy efficiency of the nation’s coldest homes.”

Robert Palmer, Uplift Deputy Director, said: “It is scandalous that oil and gas companies raked in billions in recent years whilst millions of people in the UK still struggle with sky high energy bills. Worse, these huge profits aren’t going to support the UK’s energy workers, who are being laid off as the North Sea declines, they’re going to overseas shareholders.

“It’s clear this status quo of continuing to prop up the profiteering oil and gas industry with evermore generous public handouts can’t continue. Rather than give into lobbying by oil and gas bosses for tax cuts, the Chancellor needs to focus on the UK’s long-term energy future.

“That means investing in the UK’s renewable energy industries and supporting workers into secure, long-term jobs that actually serve the UK’s needs and bring down bills permanently.”

Faiza Shaheen, Executive Director at Tax Justice UK said: “Energy companies’ billions in excess profits are extracted from the pain of millions struggling with the soaring costs of energy and essentials.

“Capitulating to industry lobbying and axing the windfall tax would be an unacceptable decision by the Chancellor, and a sign this government is on the side of the profiteers rather than the public. She must use the Budget to properly tax energy companies and big polluters, and invest in bringing down energy bills for ordinary people.”