Study finds home insulation and heat pumps offer greater economic benefits than new oil drilling

Research by the thinktank E3G indicates that insulating British homes and investing in heat pumps would reduce living costs, create employment and boost the economy more significantly than drilling for new North Sea oil. The analysis suggests that the government’s £15bn warm homes plan, which is currently facing potential budget cuts, would reduce household energy bills by £1bn annually. These savings would be concentrated among low-income households. The plan is also projected to provide a yearly economic boost of £1.6bn and generate approximately 50,000 new jobs across thousands of small businesses nationwide.

In contrast, the study found that the Rosebank oilfield, located west of Shetland, would create only about 1,100 direct and indirect jobs. These positions would be concentrated in the North Sea region and within two specific companies, one of which is the overseas investor Equinor. The energy secretary, Miatta Fahnbulleh, stated on Wednesday that a decision on the Jackdaw gasfield is imminent, while a decision on Rosebank will take longer. Although Labour promised to halt new oil and gas licensing in its 2024 election manifesto, Jackdaw and Rosebank may be exceptions as they are already in the licensing system. Equinor previously estimated that Jackdaw and Rosebank combined would create 3,500 jobs at peak activity.

Experts have noted that new North Sea oil and gas production would not lower fuel prices or ease supply constraints arising from the Iran war, as these commodities are sold on international markets. While proponents argue that economic boosts and tax revenues justify drilling, research from WWF and Uplift suggests tax revenues will be limited due to expected concessions for drillers. Total profits for Rosebank backers Equinor, Shell and Ithaca Energy could reach £1.5bn over 25 years, but the UK government faces a potential loss of £258m through tax breaks. North Sea tax revenues were about £4bn in 2025-26, but upstream tax relief and support measures amounted to an estimated £3.26bn. Revenues are projected to fall to about £100m by 2030, while taxpayers may be asked for £12bn to cover decommissioning costs.

E3G estimates that the warm homes plan, which would insulate up to 5m homes, would attract a further £15bn in private investment spread across the country. This aligns with Andy Burnham’s pledge for economic growth in every postcode. The thinktank estimates that fully delivering the plan would boost GDP by 0.08%, while AI modelling suggests Rosebank would add about 0.025% on average over its lifetime, assuming oil prices return to $70 a barrel. If taxpayers funded decommissioning, this would outweigh any positive economic impact from the oilfield.

James Huw Dyson, a senior researcher at E3G, stated that the public would not thank the government for cutting home insulation while granting tax breaks to drill for polluting energy. He argued that focusing on home insulation and clean energy would cut bills and create good jobs across Britain. Ten major unions wrote to the government on Thursday opposing a licence for Rosebank, while scores of Labour MPs and 600 scientists have also urged a rethink. Dhara Vyas, chief executive of Energy UK, said the government must stick to electrification ambitions, warning that watering down the warm homes plan sends mixed signals to a market that has been in flux for too long.

The Department for Energy Security and Net Zero declined to comment on the findings or the future of the warm homes plan. A spokesperson for Adura, the joint venture between Equinor and Shell that owns Jackdaw and Rosebank, stated that approving Rosebank and other developments would support £35.3bn in UK economic value between 2026 and 2035. Adura claims Rosebank represents £8.7bn in private sector investment, three quarters of which will be spent in the UK, and that it will contribute £4.1bn in additional tax revenue over the next decade. However, these figures include wider operations and assumptions about supply chains and employee spending, which are uncertain. They do not account for large tax reliefs estimated at more than £2.4bn, nor do they factor in a discount rate for future income, contrary to standard HM Treasury practice.