Aberdeen business leaders called for a revised city region deal and for the UK’s energy department to be moved to the north east, in a series of asks ahead of the Chancellor’s Spring Budget on Wednesday.
In a letter sent to Jeremy Hunt last week, Aberdeen & Grampian Chamber of Commerce (AGCC) said moving key functions of the newly revamped Department for Energy and Net Zero (DESNZ) to the region would be a “perfect opportunity” to deliver the government’s levelling up agenda.
They said the north-east has “as a unique opportunity to be at the forefront of the UK’s transition to net zero” thanks to its energy expertise, but that “urgent support” from government would be needed to make good on its ambitions.
The chamber reported “a growing sense of concern” from members that recent policy decisions were making the task “more challenging” and set out a series of asks ahead of the Spring Budget. These include revisions to windfall taxes on oil and gas, a “new deal” to deliver a just transition for the region and relocation of DESNZ functions, among other requests.
Moving duties to the region would be welcome recognition of the Granite City’s role in energy the transition and its local energy ecosystem, said chief executive Russell Borthwick.
It would also put the department close to major North Sea operators, the highest concentration of energy supply chain companies in the UK and a 45,000-strong offshore energy sector workforce.
End ‘disproportionate’ windfall tax
Echoing calls from the oil and gas sector, the AGCC’s primary ask was for a “stable fiscal regime” as a remedy to what it called the “overly severe application” of the government’s Energy Profits Levy (EPL), which it said have created “an adverse environment for investment and jobs”.
Noting that tax intakes had risen from £381m per month in February 2022 to £1.8bn today, it called the five-year horizon of the levy “disproportionate” and urged reform “as an immediate priority”, alongside the instalment of a price floor mechanism.
Last week trade body Offshore Energies UK also wrote to Mr Hunt, warning that billion-pound M&A deals had already gone overseas due to EPL, which has “eroded millions” from the values of North Sea firms.
Alongside a price floor, it called for further incentives for decarbonisation investment and creating a long-term investment regime.
The International Association of Drilling Contractors (IADC) North Sea chapter sent a similar letter to all MPs and MSPs asking for “more vocal support” for the oil and gas industry.
Despite pleas however, tax experts have suggested the Treasury is unlikely to tinker with any of the EPL measures in his announcement.
£1bn region deal ask
Pointing to the existing ten-year city region deal initiated in 2016, Mr Borthwick said the agreement had been “a showcase for delivery at pace”, with £250m in government funding catalysing an overall package of some £1bn thanks to private investment.
With attention now turning to “what comes next”, he asked the UK Government to match the £500m committed by the Scottish Government as part of its ten-year Just Transition Fund.
Described as “a New Deal to energise the north east”, AGCC said the move would create “an ambitious, strategic programme aligned with our refreshed Regional Economic Strategy.”
“This will enable us to emulate the success of the current City Region Deal delivering strong return on investment and enabling this part of the UK to punch above its weight as a contributor to the exchequer for another 50 years and more,” the letter adds.
AGCC also called for more investment in grid connections and capacity to enable the swift progression of new offshore wind projects – including Scotwind developments – and north-east supply chains.
Finally, it added its members to the chorus of voices from across the region in asking for clarity on the future of the Acorn CCS project.
Mr Borthwick closed the missive by inviting the Chancellor to visit Aberdeen in the coming weeks to take part in a roundtable discussion with industry stakeholders.
The Treasury has been approached for comment.