Connect with us

Published

on

Some of the world’s biggest oil companies are currently paying negative tax on their fossil fuel extraction and production operations in the North Sea.

Official data published by the UK government-backed Extractive Industries Transparency Initiative shows that in the tax year 2019-20, ExxonMobil received £117m in total from HMRC, Shell got £110m, and BP received £39m.

But these organisations are not alone.

Shell oil company
Image:
Shell got £110m from HMRC in the 2019 to 2020 tax year

A third of all significant energy companies operating in the North Sea paid negative tax last year.

This is possible in large part because of a UK tax policy that was brought in just a few months after the Paris climate accord was agreed in 2015.

The policy allows oil and gas companies to claim back public money in order to help with decommissioning rigs and infrastructure as the UK progresses towards its net zero carbon emissions targets.

Since the Paris agreement, Exxon has received net tax repayments of £360m on its North Sea operations, BP £490m, and Shell £400m, rounded to the nearest 10 million.

More on Energy

Some of these sums relate to corporate tax arrangements, but significant portions relate to money for decommissioning.

The UK government’s Oil and Gas Authority has estimated that the total bill for decommissioning will be £51bn.

Please use Chrome browser for a more accessible video player

The Daily Climate Show: can oil be green?

But because of the government’s tax policy, the British taxpayer will be responsible for nearly 40% of that over the coming decades.

HMRC has estimated that the cost to the exchequer will be £18.3bn between now and 2065.

This comes as total government income from taxes on oil revenue is decreasing, largely due to falling demand and the cost of decommissioning payments.

Energy Research company Rystad Energy recently named the UK as the country that offers oil and gas companies the “best profit conditions” in the world “to develop big offshore fields.”

Subscribe to ClimateCast on Spotify, Apple Podcasts, or Spreaker.

This has been illustrated by researchers like Greg Muttitt, who is a senior policy adviser at the International Institute for Sustainable Development.

He has calculated that in 2019 the UK government took $1.72 (£1.24) in taxes per barrel of oil, while the Norwegian government took $21.35 (£15.44).

Campaign groups say the current tax policy effectively amounts to the British public subsidising fossil fuel extraction, even as they are being urged to make greener choices in their own lives.

FILE - In this April 23, 2018, file photo, the logo for ExxonMobil appears above a trading post on the floor of the New York Stock Exchange.  Exxon Mobil on Tuesday, March 3, 2020,  outlined how it is reducing the methane its operations release into the atmosphere, detailing its efforts as governments around the globe write new rules to regulate the harmful greenhouse gas. (AP Photo/Richard Drew, File)
Image:
ExxonMobil received £117m from HMRC in the 2019 to 2020 tax year. Pic: AP

Environmental lawyer and campaign group Uplift founder Tessa Khan told Sky News: “These companies are allowed to extract oil and gas for private gain, not the public’s benefit and certainly not the Treasury’s.

“They’re not helping to pay for our hospitals and schools, they’re taking public money and handing it to their executives and shareholders.

“The harm to the climate from their actions will be borne by us all, with the poorest hit the hardest.

“There can be no excuses for propping them up with subsidies in a climate emergency. That era is over.”

A section of the BP Eastern Trough Area Project (ETAP) oil platform is seen in the North Sea, around 100 miles east of Aberdeen in Scotland February 24, 2014. REUTERS/Andy Buchanan/pool/File Photo
Image:
A section of the BP Eastern Trough Area Project oil platform seen in the North Sea in 2014. File pic

A Treasury spokesperson told Sky News: “We’re leading the world in building back better and greener from the pandemic.

“We were the first major economy to commit to net zero by 2050 and one of the first to phase out petrol and diesel car sales by 2030.

“The UK oil and gas industry has paid around £375bn in production taxes to date.

“Relief for decommissioning costs is a fundamental part of the UK’s tax system, contributing to the safe removal of oil and gas infrastructure from our natural environment whilst ensuring companies are encouraged to invest in the UK.”

A spokesperson from ExxonMobil said: “The figures in the UK EITI report relate only to extractive operations (oil & gas production), several of which are nearing the end of their economic life.

“ExxonMobil also has downstream and chemical operations in the UK, and overall made a contribution to the UK of £5.2bn in direct and indirect taxes and duties in 2020.

“Over the lifetime of the North Sea, we have been a major, net contributor to the tax revenues generated by the basin and the recent refunds simply represent a repayment of some prior paid taxes as some of our older fields enter the decommissioning phase of their life.”

A spokesperson from Shell told Sky News: “We are open about our tax payments so that people can understand what we pay and why.

“We voluntarily disclose more information than we are required to and lead best practice in this area.

“The question you raise is whether it is right that companies get tax relief for decommissioning assets.

“Decommissioning is part of the lifecycle of oil fields.

“This phase of work is heavily regulated and subject to tax legislation that enables tax relief.

“The concept of granting tax relief for genuine business expenses is fundamental to regimes that tax profits and is applicable and available to all businesses in all industries with few exceptions.

“Decommissioning costs in the oil and gas industry are treated consistently as a business expense.”

A spokesperson for BP told Sky News: “The EITI’s data cover only the extractive part of our business in the UK, our North Sea business.

“All BP’s North Sea assets are owned by companies subject to UK tax in accordance with UK law.

“BP has contributed over £40bn in taxes to the UK government with respect to its North Sea business.”

Please use Chrome browser for a more accessible video player

April: Why has BP had such a successful quarter?

Sky News has launched the first daily prime time news show dedicated to climate change.

The Daily Climate Show is broadcast at 6.30pm and 9.30pm Monday to Friday on Sky News, the Sky News website and app, on YouTube and Twitter.

Hosted by Anna Jones, it follows Sky News correspondents as they investigate how global warming is changing our landscape and how we all live our lives.

The show also highlights solutions to the crisis and how small changes can make a big difference.

Continue Reading

Business

New Look owners pick bankers to fashion sale process

Published

on

By

New Look owners pick bankers to fashion sale process

The owners of New Look, the high street fashion retailer, have picked bankers to oversee a strategic review which is expected to see the company change hands next year.

Sky News has learnt that Rothschild has been appointed in recent days to advise New Look and its shareholders on a potential exit.

The investment bank’s appointment follows a number of unsolicited approaches for the business from unidentified suitors.

New Look, which trades from almost 340 stores and employs about 10,000 people across the UK, is the country’s second-largest womenswear retailer in the 18-to-44 year-old age group.

It has been owned by its current shareholders – Alcentra and Brait – since October 2020.

In April, Sky News reported that the investors were injecting £30m of fresh equity into the business to aid its digital transformation.

Last year, the chain reported sales of £769m, with an improvement in gross margins and a statutory loss before tax of £21.7m – down from £88m the previous year.

More from Money

Like most high street retailers, it endured a torrid Covid-19 and engaged in a formal financial restructuring through a company voluntary arrangement.

In the autumn of 2023, it completed a £100m refinancing deal with Blazehill Capital and Wells Fargo.

A spokesperson for New Look declined to comment specifically on the appointment of Rothschild, but said: “Management are focused on running the business and executing the strategy for long-term growth.

“The company is performing well, with strong momentum driven by a successful summer trading period and notable online market share gains.”

Roughly 40% of New Look’s sales are now generated through digital channels, while recent data from the market intelligence firm Kantar showed it had moved into second place in the online 18-44 category, overtaking Shein and ASOS.

Continue Reading

Business

Coca-Cola brews up sale of high street coffee giant Costa

Published

on

By

Coca-Cola brews up sale of high street coffee giant Costa

The Coca-Cola Company is brewing up a sale of Costa, Britain’s biggest high street coffee chain, more than six years after acquiring the business in a move aimed at helping it reduce its reliance on sugary soft drinks.

Sky News can exclusively reveal that Coca-Cola is working with bankers to hold exploratory talks about a sale of Costa.

Initial talks have already been held with a small number of potential bidders, including private equity firms, City sources said on Saturday.

Lazard, the investment bank, is understood to have been engaged by Coca-Cola to review options for the business and gauge interest from prospective buyers.

Indicative offers are said to be due in the early part of the autumn, although one source cautioned that Coca-Cola could yet decide not to proceed with a sale.

Costa trades from more than 2,000 stores in the UK, and well over 3,000 globally, according to the latest available figures.

It has been reported to have a global workforce numbering 35,000, although Coca-Cola did not respond to several attempts to establish the precise number of outlets currently in operation, or its employee numbers.

More from UK

This weekend, analysts said that a sale could crystallise a multibillion pound loss on the £3.9bn sum Coca-Cola agreed to pay to buy Costa from Whitbread, the London-listed owner of the Premier Inn hotel chain, in 2018.

One suggested that Costa might now command a price tag of just £2bn in a sale process.

The disposal proceeds would, in any case, not be material to the Atlanta-based company, which had a market capitalisation at Friday’s closing share price of $304.2bn (£224.9bn).

At the time of the acquisition, Coca-Cola’s chief executive, James Quincey, said: “Costa gives Coca-Cola new capabilities and expertise in coffee, and our system can create opportunities to grow the Costa brand worldwide.

“Hot beverages is one of the few segments of the total beverage landscape where Coca-Cola does not have a global brand.

“Costa gives us access to this market with a strong coffee platform.”

However, accounts filed at Companies House for Costa show that in 2023 – the last year for which standalone results are available – the coffee chain recorded revenues of £1.22bn.

While this represented a 9% increase on the previous year, it was below the £1.3bn recorded in 2018, the final year before Coca-Cola took control of the business.

Read more from Sky News:
TikTok puts hundreds of UK jobs at risk
Consumer confidence at highest point this year

Coca-Cola has been grappling with the weak performance of Costa for some time, with Mr Quincey saying on an earnings call last month: “We’re in the mode of reflecting on what we’ve learned, thinking about how we might want to find new avenues to grow in the coffee category while continuing to run the Costa business successfully.”

“It’s still a lot of money we put down, and we wanted that money to work as hard as possible.”

Costa’s 2022 accounts referred to the financial pressures it faced from “the economic environment and inflationary pressures”, resulting in it launching “a restructuring programme to address the scale of overheads and invest for growth”.

Filings show that despite its lacklustre performance, Costa has paid more than £250m in dividends to its owner since the acquisition.

The deal was intended to provide Coca-Cola with a global platform in a growing area of the beverages market.

Costa trades in dozens of countries, including India, Japan, Mexico and Poland, and operates a network of thousands of coffee vending machines internationally under the Costa Express brand.

The chain was founded in 1971 by Italian brothers Sergio and Bruno Costa.

It was sold to Whitbread for £19m in 1995, when it traded from fewer than 40 stores.

The business is now one of Britain’s biggest private sector employers, and has become a ubiquitous presence on high streets across the country.

Its main rivals include Starbucks, Caffe Nero and Pret a Manger – the last of which is being prepared for a stake sale and possible public market flotation.

It has also faced growing competition from more upmarket chains such as Gail’s, the bakeries group, which has also been exploring a sale.

Coca-Cola communications executives in the US and UK did not respond to a series of emails and calls from Sky News seeking comment on its plans for Costa.

A Lazard spokesperson declined to comment.

Continue Reading

Business

TikTok puts hundreds of UK jobs at risk

Published

on

By

TikTok puts hundreds of UK jobs at risk

TikTok is putting hundreds of jobs at risk in the UK, as it turns to artificial intelligence to assess problematic content.

The video-sharing app said a global restructuring is taking place that means it is “concentrating operations in fewer locations”.

Layoffs are set to affect those working in its trust and safety departments, who focus on content moderation.

Unions have reacted angrily to the move – and claim “it will put TikTok’s millions of British users at risk”.

Figures from the tech giant, obtained by Sky News, suggest more than 85% of the videos removed for violating its community guidelines are now flagged by automated tools.

Meanwhile, it is claimed 99% of problematic content is proactively removed before being reported by users.

Executives also argue that AI systems can help reduce the amount of distressing content that moderation teams are exposed to – with the number of graphic videos viewed by staff falling 60% since this technology was implemented.

More from Money

It comes weeks after the Online Safety Act came into force, which means social networks can face huge fines if they fail to stop the spread of harmful material.

The Communication Workers Union has claimed the redundancy announcement “looks likely to be a significant reduction of the platform’s vital moderation teams”.

In a statement, it warned: “Alongside concerns ranging from workplace stress to a lack of clarity over questions such as pay scales and office attendance policy, workers have also raised concerns over the quality of AI in content moderation, believing such ‘alternatives’ to human work to be too vulnerable and ineffective to maintain TikTok user safety.”

John Chadfield, the union’s national officer for tech, said many of its members believe the AI alternatives being used are “hastily developed and immature”.

He also alleged that the layoffs come a week before staff were due to vote on union recognition.

“That TikTok management have announced these cuts just as the company’s workers are about to vote on having their union recognised stinks of union-busting and putting corporate greed over the safety of workers and the public,” he added.

Under the proposed plans, affected employees would see their roles reallocated elsewhere in Europe or handled by third-party providers, with a smaller number of trust and safety roles remaining on British soil.

The tech giant currently employs more than 2,500 people in the UK, and is due to open a new office in central London next year

A TikTok spokesperson said: “We are continuing a reorganisation that we started last year to strengthen our global operating model for Trust and Safety, which includes concentrating our operations in fewer locations globally to ensure that we maximize effectiveness and speed as we evolve this critical function for the company with the benefit of technological advancements.”

Continue Reading

Trending