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Economy Economy

Support further investment in the UK’s oil and gas sector

Last updated: 10:06am 19 September 2019

Other industries, like the oil and gas sector, are transforming. The North Sea has provided more than £300 billion in tax revenue to the UK economy and supports thousands of highly-skilled jobs across Britain. We will ensure that the sector continues to play a critical role in our economy and domestic energy supply, supporting further investment in the UK’s natural resources.

Conservative Party Manifesto 2017, p.21

Our verdict

Six of the thirty largest companies in the world are built around fossil fuels – oil and gas is big business. Since the 1960s, “more than 44 billion barrels of oil equivalent … [has] been recovered from the UK Continental Shelf”. The best guess of the Oil and Gas Authority is that as much as 20 billion may still be available. This policy is a promise to support further investment in the sector.

The role of government in supporting investment is to create a favourable environment for investors. It does this through tax reliefs and incentives, as well as more general stewardship of the economy.

Under this government, secondary legislation has been passed to extend tax relief to new types of income in the sector.

The government has also taken steps to support the growth of the UK shale gas industry, setting up a regulatory group, a planning brokerage service and extending the shale support fund.

Balanced against those developments, the Financial Times has pointed to a dramatic fall in investment in the industry, from almost 9% of total UK business investment in 2013, to just under 0.9% in 2018.

Data from the Office for National Statistics on mining and quarrying indicates that, following a fall in 2017, growth in the sector has recovered, suggesting investment levels may be rising.

More broadly, many observers view the government’s failure to secure an orderly exit from the European Union as a hindrance to business investment.

Investment levels and sector growth are both fluctuating. In some respects, the government does appear to be supporting investment. However, given the uncertainty caused by confusion over Brexit and its likely impact on inward investment, we’re marking this as ‘in progress’. We’ll be looking for a Brexit outcome which reassures investors that UK gas and oil remains a safe bet. Follow this policy to see how things develop.

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