Britains Biggest Oil Cuts North Sea Investment Hits At Labour Windfall Tax

Britain’s largest oil producer, Harbour Energy, is preparing to halve its investment in the North Sea amid fierce criticism of Labour’s so called punitive windfall tax. Executives confirmed plans to invest only £350 million in the UK sector next year, a significant drop from the £750 million committed in 2024.

This sharp reduction coincides with predictions that Harbour’s UK oil output will collapse by a third over the next two years, standing at 100,000 barrels per day, compared to the current 150,000. Harbour has already cut 600 jobs since 2022, attributing this contraction to what it describes as ongoing fiscal and regulatory uncertainty under Labour.

The company’s recent financial results outline a determined strategy to ramp up investment overseas while rolling back its British exposure. Harbour, which operates seven offshore oil and gas platforms in UK waters, emphasised that UK investment is now competing against opportunities in Norway, Mexico, and Argentina, areas where the oil giant is increasingly shifting its resources.

The windfall tax—first introduced by the Conservatives in 2022 and toughened by Labour—has contributed to an eye-watering effective tax rate of 111 percent for Harbour’s UK operations. The company said in its report that this “continued punitive domestic fiscal regime” leaves the UK sector financially unattractive.

Labour intends to keep the windfall tax in place until 2030, despite Brent crude prices having fallen from over $100 to just above $60 a barrel. Rachel Reeves, the Chancellor, faces mounting industry and political pressure ahead of the Budget, with calls to reconsider the tax for the sake of jobs, investment, and energy security.

North Sea operators broadly report that soaring costs and the ban on new drilling have forced industry-wide retrenchment. Offshore Energies UK has warned that about 1,000 jobs are being lost each month in the sector. Political leaders in Scotland have sharply criticised Westminster’s approach, warning that continued job losses and reduced domestic production risk both the Scottish economy and the UK’s energy security.

Harbour’s strategic shift is starkly clear. From January to September 2024, 80 percent of its output came from the UK; this year, that figure has plummeted to just 33 percent, with Norway now its largest market. The policy environment has made the UK an increasingly hostile destination for energy investment, according to industry voices.