“Today’s announcement is not a one-off tax — it is a multiyear proposal,” BP said. “Naturally we will now need to look at the impact of both the new levy and the tax relief on our North Sea investment plans.”
The company’s chief executive, Bernard Looney, had said earlier this month that none of BP’s planned £18bn ($22.7bn) UK investments would be affected if a windfall tax were introduced.
Looney’s comments on investments, and the lack of strong pushback from other companies, are believed to have encouraged policymakers to press ahead with the tax.
Shell (SHEL.L) said a “stable environment for long-term investment” was required if it was to execute its planned investment of £20bn to £25bn in the UK over the next decade.
The Confederation of British Industry says the chancellor's windfall tax will hurt the UK's net zero ambitions.
Rain Newton-Smith, CBI chief economist, said the tax "sends the wrong signal to the whole sector at the wrong time", pointing to a "backdrop of rising business taxation".
The trade group Offshore Energies UK released an open letter warning of "severe consequences" if the tax went forward.
"A one-off windfall tax on energy producers will not sustainably help consumers and will only further reduce investor confidence in the UK, the ripple effect of which we will feel for many years to come," wrote 31 members of trade group Offshore Energies UK.
"We look at current calls for a windfall tax on energy producers with grave concern that it would be a blunt short-term response which could undermine the levers to long term solutions."
The oil companies argue that because of their increased profits they are already paying billions more in tax this year.
In a note on Wednesday morning analysts at JP Morgan (JPM) argued that “sustained underinvestment” in energy have sown the seeds of a “supercycle” — a sustained period of expansion as demand grows beyond supply.
The levy includes a mechanism designed to boost investment, “so the more a company invests, the less tax they will pay”, Sunak said.
A near-doubling of the investment allowance to 80%, on top of other measures, means firms will get 91 pence back per £1 spent for a total relief rate of 91.25%.
Sunak said that energy companies had benefited from the surge in global commodity prices, in part driven by the war in Ukraine, and that some of their soaring profits could be used to protect low-income households.
Oil and gas companies will be charged a 25% tax on their “extraordinary” profits. The tax will be phased out as energy prices return to normal, Sunak said, but will not last beyond 2025.
It will generate £5bn over the next year, amounting to about a third of the cost of the direct payments for households, the Treasury estimated.
Watch: Windfall tax on oil and gas firms: Jacob Rees-Mogg warns Rishi Sunak that no tax is 'economically cost-free'