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PwC responds to the Chancellor’s cost-of-living announcement and Energy Profits Levy

26 May 2022

Vicky Parker, PwC Partner, Head of PwC Power and Utilities

“All households, businesses and particularly their employees will be feeling the direct effect of rising inflation, higher energy costs as well as fuel costs. While a £5 billion support package funded through the energy levy as part of a wider £15bn programme will be welcomed by many, it is crucial that any one off payments are targeted at those most affected. Although a significant amount, there will be many that will still struggle with rising energy costs in the short term. In addition, costs are predicted by Ofgem to increase further by £800 to around £2800 in October.    

“While a key focus of today’s announcement is on supporting households that are finding it hard to make ends meet, it’s vital that those small and medium sized businesses who are also struggling to manage rising energy and supply prices alongside workforce costs are not forgotten. A package to reflect these challenges in future would undoubtedly be welcomed by businesses and industries up and down the country and could go a long way to preserving jobs and creating much needed future revenues.” 

 

Drew Stevenson, PwC UK Energy, Utilities and Resources Leader of Industry

“The urgency for the Government to act to ease the burden on households is completely understandable, however it’s critically important that in doing so, it strikes a balance between supporting energy affordability in the short term and incentivising investment in the wide range of transitional schemes and ‘green’ infrastructure needed to support its ambitious 2050 net zero targets and providing energy security. 

“Investors looking to deploy significant funds into energy projects need fiscal stability to make those long term planning decisions. While the Investment Allowance is certainly welcome, the investment cycle for many oil and gas projects will present timing challenges for firms to have enough time to benefit from it. The Government will need to assuage investors over the medium and long term and ensure future investment is not choked.

“It’s important to recognise that implementing a complex tax that is focused on the beneficiaries of super high prices in an equitable manner may not be straightforward. They will have to walk a fine line and find a way to reward and encourage sustainable, green investment by UK North Sea operators - from global and integrated oil majors to smaller players alongside UK focused independent operators. The industry would undoubtedly welcome any future plans that include ring fencing certain investments such as those poured into low carbon energy projects.” 

 

David Lewis, PwC UK Energy, Utilities & Resources Tax leader,  comments

“The new Energy Profits Levy, coupled with the super deduction styled Investment Allowance will have a significant impact on many companies in the sector. Consistent with many tax reform measures, the impact on companies will vary significantly, based on factors including the life cycle of projects, current profitability and investment strategies, particularly considering lead times for new investment activity.  The Investment Allowance announced means companies will need to review their capital investment plans. Businesses will be waiting for more to be shared on the parameters and conditions of the Allowance - how much investment and to what projects? 

“Investment in the right avenues, ones that protect and build on jobs and skills, while meeting the low carbon goals of the UK, will be the desired output. The Chancellor will need to set out the framework to help make investment for carbon sensible growth possible.”

 

ENDS

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