While the government acknowledged the strategic role of domestic fuel production and industrial sites, many in the sector say the Budget falls short of delivering the confidence needed to stabilise the sector and deliver long-term investment.
Refining: recognition from government, urgency from industry
The Budget acknowledged role refineries play in energy security and the UK industrial base and launched a call for evidence to consider the feasibility of future inclusion of refined products in the Carbon Border Adjustment Mechanism (CBAM).
However, Fuels Industry UK said this acknowledgement fails to provide the stability the sector needs. Chief Executive Elizabeth de Jong warned: “British refiners will continue facing higher carbon costs than competitors abroad until its CBAM takes effect, and without urgent interim support the sector may not survive that long.
The industry organisation considers stabilising the sector is essential to deliver supply security and avoid further industry job and capacity losses.
She urged government to move quickly on interim measures, including reallocating unused carbon allowances from recently closed sites to refineries still operating, describing this as “a simple, immediate measure that would ease cost pressures now.”
North Sea exploration: restrictions tighten but limited tie-backs permitted
The government confirmed a crackdown on new North Sea exploration, alongside no change to the windfall tax, commenting that “alongside meeting our moral obligation to support today’s workers, we must also meet our moral obligation towards future generations by helping to tackle the climate crisis”.
A new mechanism – the Energy Transition Certificate – will permit some tie-back projects linked to existing fields provided they are deemed necessary for a “managed transition.”
The government’s decision to retain the 78% Energy Profits Levy drew sharp criticism from North Sea producers. INEOS Energy chairman Brian Gilvary warned the move undermines the sector’s competitiveness: “Today’s decision leaves the UK with one of the least competitive fiscal regimes in the world… It will continue to drive capital overseas, stifle production, remove jobs, and increase dependence on overseas oil supplies.”
He added that the levy was introduced in response to a temporary price surge that has long since passed yet remains in place.
Conversely, environmental and labour groups backed the overall direction but said worker support is far too limited. Greenpeace said the plan “doesn’t go far enough”.
Co-executive Director, Areeba Hamid, said: “It’s vital they are at the heart of Britain’s transition to a clean-energy superpower, not left behind by it – but a £20m jobs package doesn’t cut the mustard. A fair transition will create thousands of new jobs, strengthen communities, and prove that climate leadership and economic security can go hand in hand.”
UK workers union, Unite, has described it as “tinkering around the edges by a government still lacking a coherent plan for the long-term transition of work for oil and gas workers.”
Unite general secretary Sharon Graham argued: “This government’s drive towards net zero amounts to recklessly letting go of one rope before you have hold of another… There is still no coherent plan for a just transition for workers in the sector.”
She highlighted refinery closures this year and expressed frustration that opportunities to develop green fuels production had not been grasped.
Transition support lacking
The Chancellor announced measures to strengthen the UK’s transition capability, including:
- funding to recruit more planning officers
- support for reforms to accelerate nuclear development
- £14.5m for redevelopment of the Grangemouth petrochemical site, which the Treasury described as having an “almost 150-year history as a key UK industrial site.”
Yesterday’s Budget signals a government attempting to balance energy security, climate goals and fiscal constraint, but without yet offering the clarity industry needs.
With refineries under pressure, North Sea investment waning and transition plans still developing, the coming months will be crucial. Meaningful policy certainty – particularly around CBAM, windfall taxation and support for workers – will determine whether the UK’s downstream and upstream sectors can adapt successfully to the demands of a lower-carbon future.
Image from stock.