There were two key takeaways for the energy sector from chancellor Rishi Sunak’s cost of living measures (25 May). First the windfall tax – or ‘temporary, targeted energy profits levy’ – went further than the measures proposed by Labour.

Second, power generation firms are not out of the woods yet despite any announcement on a levy on their excess profit being delayed.

Ominously the Treasury is ‘urgently evaluating’ the situation and shares in the likes of Drax (DRX) and SSE (SSE) remained under pressure in the aftermath of Sunak’s statement.

The new 25% tax on North Sea oil and gas profits, which will include 90% tax relief on investment in UK hydrocarbons extraction, could last for up to three years or until ‘oil and gas prices return to historically more normal prices’.

While BP (BP.) and Shell (SHEL) intimated this could impact their UK spending plans, despite the accompanying relief, the North Sea is only a small part of their business and you would not expect them to respond to news of more onerous taxation by shrugging their shoulders.

The decision has more gravity for smaller, independent producers with the largest of these, Harbour Energy (HBR), now down 25% since the start of May.

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