Sheena McGuinness, Co-Head of Energy and Natural Resources, at RSM UK comments ahead of the Autumn Budget 2025: “With oil prices at the lowest level since early 2021, we expect the Chancellor to take this opportunity to reverse the 5p fuel duty cut and align rates with inflation. These changes are already baked into the OBR’s forecast, so if the changes are deferred another year, then the Chancellor will need to find revenues from elsewhere to balance the books.

“Ultimately, increasing fuel duty is only a short-term fix to offset the growing deficit caused by declining fuel duty revenues, so it’s no surprise that introducing a pay per mile scheme is being considered again, after being ruled out ahead of last year’s budget.

“Cutting the cost of living is a key priority for the government, and reducing VAT on energy bills would be a boost to consumers, industry and the economy due to the deflationary impact it would deliver. This will help lower prices now, but tackling the root cause of continued reliance on energy imports due to low domestic oil production needs addressing. This is what exposes consumers to price volatility, so if we can get the right mix of domestic energy supply, then we can shield consumers from global price shocks, strengthen our energy security and drive sustainable economic growth.

“However, restrictions to oil field licences and steep additional taxes on oil-related activity has hit investment in the UK energy sector and, in turn, associated tax revenues. This unfavourable investment landscape is leading to capital migrating overseas towards more viable energy projects. The imminent North Sea strategy might help to stem the flow of lost investment and bridge the gap to utilise domestic oil and gas, as we transition away from fossil fuels.

“Acknowledging the need for long term certainty for the energy sector, the government has recently consulted on a new, permanent measure to replace the EPL when it ends in 2030. So could we see a full repeal of EPL in 2026, or a phased reduction through to 2030, in the budget. Either way the energy sector needs any new measures to stimulate, not hinder, investment.

She added: “One thing that could help unlock investment is improving grid capacity and delays to connection. We’ve seen curtailment payments, where generators are paid not to produce clean energy because the grid can’t absorb it, hit £158m this year alone. Currently the UK is only using 63% of our total energy and remaining energy is curtailed which is counterproductive and costly. Ultimately, we have a supply and demand problem, as the energy we are producing can’t get to where the demand is needed, which is where imported energy plugs the gap.

“This highlights the urgent need for investment in grid infrastructure and storage solutions to ensure that renewable energy can be fully utilised rather than curtailed. In the meantime, could the surplus wind energy be redirected towards energy intensive operations such as hydrogen production which could then potentially be redistributed through the UK gas network. In addition, could the main by-product of hydrogen production, water, help to improve access in areas that need it.

“With government plans to expand wind capacity, addressing these issues with innovation in the forthcoming budget is critical - not just for decarbonisation targets, but for delivering value to consumers and taxpayers, while mitigating any future challenges."

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