UK Budget 2025: PwC comments on the impact on the energy sector 

Commenting on today’s Budget announcements impacting the energy sector, Vicky Parker, Industry Leader for Energy, Utilities and Resources at PwC UK, said:

“While the widely discussed 5% VAT cut on domestic energy bills did not materialise, the Government has pledged to remove or cancel certain levies from electricity bills, including the cancellation of the Energy Company Obligation (ECO) scheme. Ofgem has cited policy costs as a factor in its decision to increase the energy price cap for the first quarter of 2026, offsetting reductions in wholesale energy prices. 

“Shifting the funding of certain schemes away from electricity bills is unlikely to have a significant impact on consumers. These policy costs, previously included in the standing charge, will now be covered through general taxation. The Government will need to address any distributional effects and affordability issues arising from this change through tax policy. 

“For businesses, the impact is more nuanced. An eight-week consultation for the British Industrial Competitiveness Scheme (BICS), will determine eligibility for energy cost support in high-growth industries from April 2027. While a positive move, many businesses remain cautious, seeking to stay competitive as British electricity prices remain among the highest in the G7. 

“The Budget reaffirmed support for investment in low-carbon energy, specifically calling out investment in small modular nuclear reactors as well as other low carbon technologies. However, the pace of delivery for these initiatives will be critical to achieving the intended dual benefit of lowering energy bills as well as meeting the UK's decarbonisation commitments. 

“We may see disappointment within the industry as lobbying for changes to the Energy Profits Levy to encourage new investment in the North Sea was not reflected in the Budget. The sector did get more information about the EPL’s proposed replacement from 2023: the oil and gas pricing mechanism will apply a 35% tax on revenue from sales of oil at more than $90 a barrel or gas at 90p a therm.  

“Government also announced help to ensure a managed, orderly and prosperous transition, through the introduction of new ‘Transitional Energy Certificates’. They will give the holder exclusivity over a specific area of the seabed. The challenge now lies in implementing these measures effectively, ensuring that efforts to protect consumers do not inadvertently increase costs elsewhere. This will require close collaboration between government, industry and the supply chain.” 

Our full Budget reaction