London, UK – December 1, 2025 – Harbour Energy (LSE: HBR), the UK's largest oil and gas producer, today announced a further reduction of approximately 100 offshore North Sea jobs. This latest round of redundancies is a direct consequence, according to the company, of the persistent and impactful Energy Profits Levy (EPL), commonly known as the windfall tax, on energy commodity producers. The move underscores growing concerns within the industry about the long-term viability and competitiveness of the UK's oil and gas sector under the current fiscal regime.

The decision to cut jobs comes as Harbour Energy grapples with what it describes as an "uncompetitive tax regime" that has severely impacted its financial performance and investment outlook in the UK. The company has been a vocal critic of the EPL, arguing that the levy stifles investment, accelerates the decline of the North Sea basin, and ultimately leads to job losses, directly contradicting the government's stated goals of energy security and economic growth.

The Deepening Impact of the Energy Profits Levy

This latest announcement on December 1, 2025, marks another significant blow to the UK's offshore workforce and follows a series of strategic adjustments by Harbour Energy (LSE: HBR) in response to the challenging fiscal environment. The 100 offshore job cuts are part of a broader review of the company's UK operations, with a consultation period expected to conclude in the first quarter of 2026. This is not an isolated incident; Harbour Energy has been systematically reducing its workforce since the windfall tax's inception, shedding approximately 700 jobs in total. This includes around 250 onshore positions in Scotland earlier in 2025 and 350 job cuts in 2023, effectively halving its workforce since the levy was imposed.

The Energy Profits Levy was initially introduced in May 2022 as a 25% surcharge on the extraordinary profits of oil and gas companies, with the aim of funding cost-of-living support measures. However, the levy has undergone several significant escalations and extensions. In November 2022, the rate was increased to 35%, and further hikes brought the EPL rate to 38%, pushing the total headline tax rate for the oil and gas sector to an onerous 78%. More recently, effective November 1, 2024, the EPL rate was increased by another 3 percentage points to 38%, and crucially, the Labour government extended its end date to March 31, 2030. Alongside these changes, the EPL's general investment allowance was removed, although a decarbonisation investment allowance was retained at a reduced rate of 66%.

Harbour Energy's financial statements starkly illustrate the levy's impact. The company reported a $93 million loss for 2024, a dramatic reversal from a $45 million profit in 2023, with its tax bill more than doubling. Managing Director Scott Barr explicitly stated that the offshore reorganisation is necessary to align their operating model with reduced activity and production levels in the UK, directly accelerated by the retention of the EPL. CEO Linda Cook has repeatedly warned that the continued existence of the UK's windfall taxes until 2030 would inflict "irreversible harm" on the British oil and gas industry, making it increasingly difficult for their UK business unit to compete for capital within their global portfolio.

Market Winners and Losers in a Changing Fiscal Landscape

The immediate and most apparent loser in this scenario is undoubtedly Harbour Energy (LSE: HBR). The company's consistent job cuts, significant financial losses, and vocal criticisms highlight the direct adverse effects of the windfall tax on its operational capacity and investment decisions in the UK North Sea. As a company heavily focused on UK assets, Harbour Energy finds itself particularly exposed to the punitive tax regime, leading to reduced capital allocation, decreased exploration, and ultimately, a shrinking footprint in the region. Its ability to attract and retain talent is also severely hampered by the ongoing uncertainty and declining prospects.

Other North Sea producers, while potentially larger and more diversified, are also feeling the pinch. Integrated energy giants such as Shell (LSE: SHEL) and BP (LSE: BP.) have also expressed concerns about the EPL's impact on investment in the UK. While their global portfolios might cushion the blow somewhat, the uncompetitive tax environment deters new investment in UK projects, potentially leading them to prioritize opportunities in regions with more stable and predictable fiscal policies. This could result in a gradual decline of their UK upstream activities, impacting the broader supply chain and service companies that rely on these operators.

Conversely, the "winners" are less clear-cut and more indirect. Companies focused on renewable energy projects, particularly those that align with decarbonisation efforts, might find some relative advantage due to the retained decarbonisation investment allowance within the EPL. However, the overall negative sentiment towards the UK's energy investment climate could still pose challenges. Furthermore, energy companies operating in other global jurisdictions with more favorable tax regimes could be indirect beneficiaries, as capital that might have otherwise flowed into the UK North Sea is redirected to more attractive markets. The UK government, in the short term, gains additional revenue from the levy, which can be used for public spending, but at the potential cost of long-term energy security and industry decline.

Wider Significance and Industry Trends

Harbour Energy's latest job cuts are symptomatic of broader, converging trends impacting the UK's energy landscape. Firstly, it underscores the accelerating decline of the mature North Sea basin. While a natural decline is inevitable, the EPL is widely seen by the industry as hastening this process by disincentivizing the necessary investments to extend field life and develop new discoveries. This directly conflicts with the UK's energy security objectives, especially in a volatile geopolitical environment where domestic production is crucial.

Secondly, the event highlights the ongoing tension between climate goals and energy security. While the government aims to transition to net-zero, maintaining a stable supply of domestic oil and gas during this transition is vital. The EPL, in its current form, appears to prioritize short-term revenue generation over the long-term health of the oil and gas industry, potentially making the energy transition more reliant on imports. The removal of the general investment allowance further discourages conventional oil and gas investment, while the reduced decarbonisation allowance might not be sufficient to spur significant green investments from traditional oil and gas players within the UK.

The ripple effects extend beyond the operators themselves to the extensive supply chain and service companies that support North Sea operations. Reduced activity and investment by major players like Harbour Energy will inevitably lead to further job losses and reduced contracts for these crucial ancillary businesses, impacting regional economies heavily reliant on the oil and gas sector. Investor confidence in the UK's energy sector is also being eroded, making it harder to attract the capital needed for both traditional and new energy projects. Historically, similar windfall taxes in other jurisdictions have often led to reduced investment and production, demonstrating a clear precedent for the current situation in the UK.

What Comes Next for the UK Energy Sector

In the short term, the outlook for the UK's North Sea oil and gas industry appears challenging. Further job cuts across the sector are a distinct possibility as companies continue to adapt to the extended and intensified windfall tax. We can anticipate a continued reduction in exploration and appraisal activities, leading to a faster depletion of existing reserves and a diminished pipeline of future projects. Companies like Harbour Energy (LSE: HBR) will likely continue to prioritize capital allocation to regions with more predictable and competitive fiscal regimes, further accelerating the decline of UK production.

Looking further ahead, the long-term trajectory points towards an accelerated energy transition, albeit potentially with a period of increased reliance on imported energy. The UK government has confirmed details of a new, permanent "Oil and Gas Price Mechanism" (OGPM) set to replace the EPL when it ends in March 2030, or potentially earlier if the "Energy Security Investment Mechanism" (ESIM) is triggered by sustained low prices. The OGPM, a revenue-based tax applying an additional 35% rate when oil and gas prices exceed certain thresholds, suggests a continued, albeit different, form of levy on the sector. Legislation for the OGPM is expected in the Finance Bill 2026-27, which will be a critical document for investors to scrutinize.

Potential strategic pivots for energy companies operating in the UK include a more aggressive shift towards renewable energy projects if the decarbonisation incentives prove sufficiently attractive, or a complete re-evaluation of their UK presence in favor of international opportunities. Market opportunities may emerge for companies specializing in decommissioning and carbon capture and storage (CCS) technologies, as the North Sea basin transitions. However, the overarching challenge remains attracting significant investment in any energy sector given the perceived policy instability.

A Critical Juncture for British Energy

Harbour Energy's decision to slash another 100 jobs is a stark and somber indicator of the profound and escalating impact of the UK's Energy Profits Levy on the domestic oil and gas industry. The key takeaway is that while the windfall tax aims to generate revenue, its current structure and extension are actively undermining investment, accelerating decline, and leading to significant job losses within a crucial sector. The company's reported $93 million loss in 2024 and an effective tax rate of 108% paint a clear picture of the fiscal pressures.

Moving forward, the market will closely monitor not only the financial performance of UK-focused energy companies but also the government's rhetoric and any potential adjustments to its energy policy. The tension between securing domestic energy supplies, meeting climate targets, and ensuring a competitive fiscal environment remains at the forefront. Investors should watch for further announcements from other North Sea operators, the evolution of the proposed Oil and Gas Price Mechanism, and any signs of a shift in government strategy regarding the balance between short-term revenue and long-term industry health. The sustainability of the UK's energy sector hinges on finding a stable and predictable policy framework that can attract, rather than deter, vital capital investment.

This content is intended for informational purposes only and is not financial advice