On November 26, 2025, Chancellor Rachel Reeves presented her second Budget, outlining vital fiscal strategies amidst economic stagnation, high inflation, and significant borrowing. Emphasizing economic growth and industry innovation, the speech highlighted stability, investment, and reform, especially in energy and infrastructure sectors. Businesses in these areas should prepare for tighter tax policies and new investment incentives.
Oil & Gas and the North Sea Transition
The Chancellor introduced a new Oil and Gas Price Mechanism (OGPM) to replace the Energy Profits Levy (EPL) by March 2030, pending the Energy Security Investment Mechanism trigger. As a windfall tax, OGPM targets upstream oil and gas firms, applying a 35% tax on revenues exceeding $90/barrel for oil and £0.90/therm for gas. This measure, set to be permanent, will be enacted after consultations. Immediate legislation will ensure no decommissioning relief deed payments relate to EPL or OGPM post-November 26, 2025.
A new North Sea Future Plan aims to bolster the offshore industry by focusing on offshore wind, carbon capture, usage and storage (CCUS), and hydrogen. Transitional Energy Certificates will support limited oil and gas production near existing fields.
The possibility of including refined products in the Carbon Border Adjustment Mechanism (CBAM) is under governmental review.
Reducing Energy Bills
The Chancellor plans to cut consumer energy bills by eliminating some levies funding social and environmental schemes, such as the Energy Company Obligation. The government will cover 75% of the domestic cost of the legacy Renewables Obligation for three years and extend the £150 Warm Home Discount to an additional 3 million low-income households. These changes indicate a shift towards broader Exchequer funding, potentially reducing electricity prices.
For road transport, the 5p fuel duty cut is extended until August 2026, with rates returning to March 2022 levels by March 2027, cancelling the inflation-linked rise for 2026-27. This, along with Fuel Finder, is expected to save families £89 next year.
The British Industrial Competitiveness Scheme will begin in 2027, reducing electricity costs by £35-40/MWh for manufacturing and energy-intensive industries. The scheme will exempt eligible businesses from costs related to the Renewables Obligation, Feed-in Tariff, and Capacity Market schemes.
Low Carbon Technologies
The government sees clean energy as a growth driver. It supports hydrogen, CCUS, and offshore wind, with Budget changes exempting electricity for hydrogen production from the Climate Change Levy (CCL) costs, effective Spring 2026. This benefits green hydrogen projects.
An investment of £14.5m in Grangemouth, Scotland aims to create jobs and support industrial projects. The site, previously an oil refinery, is considered for redevelopment as a low carbon energy hub.
Nuclear
Nuclear energy’s role in the Clean Energy Superpower Mission is underscored in the updated Green Financing Framework, allowing nuclear-related expenditures as eligible for green financing. S&P rates the new framework as dark green. The government is advancing projects like Sizewell C and aims to identify sites for large-scale nuclear power, with reforms to be outlined following the Nuclear Regulatory Review 2025.
The Prime Minister’s Strategic Steer emphasizes accelerating nuclear delivery through improved regulation and collaboration. The government plans to publish an Advanced Nuclear Framework to develop privately-led advanced nuclear technologies.
Grid
Efforts to enhance electricity grid connections involve collaborations with Ofgem and the National Energy System Operator (NESO), aiming to streamline processes and reserve capacity for key projects. The Planning and Infrastructure Bill will introduce mechanisms to allocate released capacity.
Transport
The electric vehicle (EV) sector will see a new mileage charge, known as the Electric Vehicle Excise Duty (eVED), starting April 2028. Battery electric cars will incur a 3p per mile charge, and plug-in hybrids 1.5p, funding £200m for EV charging points. A review of public EV charging costs will begin in Q1 2026.
Key transport projects include the Docklands Light Rail extension to Thamesmead and the Lower Thames Crossing, with the latter following the Regulated Asset Base (RAB) model. The Forth Green Freeport, approved for £25 million seed funding, aims to attract £7.9 billion investment over 10 years.
The government plans to enable Heathrow’s third runway by 2035, with a review of the Airports National Policy Statement underway. The expansion will be privately financed. Other transport measures include a freeze on regulated rail fares and a continuation of the fuel duty freeze.
Social and Defence Infrastructure
The Budget reiterated investment in sectors like social housing, health, education, and defence. Plans include 250 new Neighbourhood Health Centres, £1.5bn for defence accommodation, and £20 billion for the School Rebuilding Programme. Private finance will be considered for new town developments.
Digital Infrastructure
Investments up to £2 billion will support a modern public compute ecosystem, including an AI Research Resource expansion and a new national supercomputer service at the Edinburgh Parallel Computing Centre.
Other Measures
A Strategic Asset Review will identify monetization opportunities, while HS2 Ltd aims to release land for regeneration linked to the HS2 programme. These initiatives support economic growth and development.
Original Story at www.slaughterandmay.com