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On 26 November 2025, the Chancellor, Rachel Reeves, delivered her second Budget. Facing a challenging fiscal landscape of stalled economic growth, above-target inflation, and high government borrowing, she emphasised the need to continue efforts to grow the economy and “build the industry of the future". Stability, investment and reform were key themes of her speech, alongside energy and infrastructure. For businesses operating in the UK’s energy and infrastructure sectors, the Budget signals that the government is prepared to tighten sector-specific tax levers, whilst deploying measures to unlock investment. This publication highlights several of the most relevant measures, and offers initial observations on their implications for sponsors, investors, and lenders.

Oil & Gas and the North Sea Transition

The Chancellor confirmed plans for a new Oil and Gas Price Mechanism (OGPM) to replace the Energy Profits Levy (EPL) which is due to end by March 2030, but could end earlier if the EPL’s price floor (called the “Energy Security Investment Mechanism”) is triggered. Like the levy, the OGPM is intended to act as a windfall tax on upstream oil and gas companies operating in the UK/UKCS and will apply to disposals of oil or gas when the consideration received is unusually high. The new mechanism will be revenue-based and apply an additional tax rate of 35% above price thresholds of $90/barrel for oil and £0.90/therm for gas (indexed to CPI). The OGPM will be a permanent measure, to be introduced in the next Finance Bill after consultation on draft legislation and implementation and coming into effect when the EPL ends. More immediately, legislation will be included in Finance Bill 2025/26 to confirm that no payment under a decommissioning relief deed (DRD) can arise in relation to the EPL for decommissioning expenditure incurred on or after 26 November 2025. The OPGM legislation will also ensure no payments under a DRD regime can be made in respect of the OGPM.

The announcement of a new North Sea Future Plan to support ongoing investment in the North Sea provided a counterpoint for the UK’s offshore industries. The plan envisages that, alongside oil and gas production from existing fields, the North Sea’s energy future will be focused on three key clean energy sectors: offshore wind; carbon capture, usage and storage (CCUS); and hydrogen. As part of this new North Sea strategy, the government will introduce new Transitional Energy Certificates. Administered by the North Sea Transition Authority, they will enable limited oil and gas production on or near existing fields - so long as this additional production does not require new exploration, is already part of, or is adjacent to, existing fields and infrastructure and the activity is necessary for a managed, prosperous and orderly transition.

In relation to refineries, the government is also considering the feasibility and impacts of including refined products in the Carbon Border Adjustment Mechanism (CBAM) in future.

Reducing Energy Bills

The Chancellor has prioritised lowering energy bills for consumers by removing some social and environmental levies funding a range of schemes. This includes ending the Energy Company Obligation which is currently funded through bills. In addition, the government will fund 75% of the domestic cost of the legacy Renewables Obligation for three years, and extend the £150 Warm Home Discount to a further 3 million of the poorest households. Taken together, these changes mark a modest, but symbolically important shift away from funding legacy low-carbon and social schemes solely through electricity bills and towards broader-based Exchequer funding, easing pressure on electricity prices while reopening questions about who ultimately bears the cost of decarbonisation policies.

In relation to road transport, the government is extending the 5p fuel duty cut until the end of August 2026 with rates then gradually returning to March 2022 levels by March 2027. The planned increase in line with inflation for 2026-27 will also be cancelled. Alongside the introduction of Fuel Finder, these measures are expected to save families £89 next year compared to previous plans.

Support is also offered to industrial energy consumers struggling with the high cost of power. From 2027, the British Industrial Competitiveness Scheme will reduce electricity costs by c.£35-40/MWh. In line with the government’s Modern Industrial Strategy, the scheme will benefit manufacturing, electricity intensive frontier industries such as automotive and aerospace, and foundational manufacturing industries in their supply chains, such as chemicals. The Department for Business and Trade launched a consultation in November to determine design and eligibility for the scheme. Under the proposals, eligible business activity would be exempt from the cost of the Renewables Obligation, Feed-in Tariff and Capacity Market schemes (in addition to other support received under measures for energy intensive industries).

Low Carbon Technologies

The government continues to see clean energy and low carbon technologies as drivers of economic growth. Alongside support for hydrogen, CCUS and offshore wind highlighted in the North Sea Future Plan, the Budget makes changes to the treatment of electrolytic hydrogen in the Climate Change Levy (CCL). Following a consultation at Spring Statement 2025, both electricity used in electrolysis to produce hydrogen and natural gas used as a source of CO2 in the production of sodium bicarbonate will be made exempt from CCL costs. Exempting electricity used for electrolysis would improve the operating cost profile of green hydrogen projects. Subject to parliamentary approval, these amendments will be in force by Spring 2026.

In addition, the Chancellor announced that the government is investing £14.5m in Grangemouth, Scotland to support investment opportunities and industrial projects which can create new jobs. The former oil refinery stopped processing crude oil in April, and although the Budget does not set out details, the site has previously been earmarked for redevelopment, including as a low carbon energy hub. Further detail on the delivery model - including any role for the National Wealth Fund or blended finance structures - will be important for investors assessing opportunities linked to CCUS, hydrogen, or wider decarbonisation in the region.

Nuclear

Reflecting its key role in the government’s Clean Energy Superpower Mission, the nuclear sector featured prominently in the Budget. The Green Financing Framework has been updated to include nuclear energy in the list of eligible expenditures for green financing (with some exclusions), including green gilts and retail Green Saving Bonds. The proceeds from sales of green gilts and Green Savings Bonds issued prior to 27 November 2025 will not be allocated to nuclear energy-related expenditures. A Second Party Opinion from S&P reportedly rates the new Framework as dark green, their highest rating, and an improvement on the Framework’s original rating in 2021. For investors, this recognition widens the pool of capital that can treat nuclear-related expenditure as “green” within UK-labelled instruments, aligns the UK more closely with jurisdictions that recognise nuclear as a low-carbon technology, and may over time influence how institutional investors with strict green mandates calibrate their exposure through nuclear assets.

Having reached financial close for the Sizewell C nuclear power plant and announced the UK’s first small modular reactor project at Wylfa in North Wales earlier this month, the government also committed in the Budget to “continue to identify potential sites for large-scale nuclear power”. In addition, responding to recommendations laid out in the Nuclear Regulatory Review 2025 (published by the Nuclear Regulatory Taskforce on 24 November), the government confirmed its aim to present a full implementation plan within three months and to complete sector reforms within the next two years, subject to legislative timelines. These reforms will be designed to “regulate nuclear in a way that promotes better delivery without compromising safety”. For the nuclear supply chain, the combination of a clear reform timetable and an expanded pipeline of large-scale and advanced projects should help derisk investment in skills, manufacturing capacity, and components. 

Building on this, the Prime Minister also used the Budget to issue a Strategic Steer, setting out expectations for the civil, defence, and decommissioning sectors to accelerate safe and efficient delivery through proportionate regulation and stronger collaboration. The government wants to avoid a “nuclear gap by enabling existing stations to continue running where demonstrably safe, such as through the potential 20-year lifetime extension of Sizewell B, and by getting Hinkley Point C and Sizewell C online as soon as possible”. An Advanced Nuclear Framework is due to be published shortly to provide a pathway for privately-led advanced nuclear technologies with Great British Energy - Nuclear assessing project proposals, the National Wealth Fund exploring potential investment opportunities and the Department for Energy Security and Net Zero (DESNZ) exploring revenue support for viable projects. 

Grid

Recognising that connections to the electricity grid remain one of the biggest blockers in delivering key growth projects across the economy, the government notes that it is working with Ofgem and the National Energy System Operator (NESO) to overhaul connection processes. This work is said to include exploring enhanced entry and membership requirements to ensure viable projects progress in the demand queue; reducing the time to power by exploring self-build for high voltage grid infrastructure and more flexible connections where possible; and removing speculative demand in the grid connection queue, with the Department for Science, Innovation and Technology (DSIT) to produce a strategic plan for data centres to ensure only the most strategic and credible projects are taken forward. New powers in the government’s flagship Planning and Infrastructure Bill are also set to create mechanisms to reallocate released capacity and reserve future capacity for strategically important demand projects.   

Transport

The Chancellor’s tax-led efforts to generate revenue for the government have been extended to the electric vehicle (EV) sector. A new mileage charge, the Electric Vehicle Excise Duty (eVED), will be introduced at a rate of 3p per mile for battery electric cars and 1.5p for plug-in hybrid cars from April 2028. This will allow the government to invest a further £200m in EV charging points. Drivers will pay for their mileage alongside their existing vehicle excise duty. From 2028, this will begin to erode one of the fiscal advantages of EVs over internal combustion engine vehicles, and will be an important factor in total-cost-of-ownership models for fleet operators and mobility providers.  

At the same time, the government has launched a consultation on reforming permitted development rights to make it easier and cheaper to install EV charging infrastructure such as upstands and cross-pavement solutions. It has also said it will review the cost of public EV charging, looking at the impact of energy prices, wider cost contributors, and options for lowering these costs for consumers. The review will start in Q1 2026 and report by Q3 2026. 

Noting that "infrastructure is the backbone of economic growth across our country”, the Chancellor confirmed support for a number of key projects across Great Britain. These include the Docklands Light Rail, which will be extended to Thamesmead, funded by Transport for London and Greater London Authority, “with the government also contributing over the long term”.  

The government is also committing a further £891 million to complete the publicly funded works for the Lower Thames Crossing, described as “the largest roadbuilding project for a generation”, improving links between the Midlands, North and ports in the South East. As part of its staged approach, the final tranche of government support will enable the private sector to take forward construction and long-term operation. The government’s preferred financing option at this stage is the Regulated Asset Base (RAB) model. The project will be taken forward on that basis, with formal market engagement launching in 2026. This confirms the government’s willingness to deploy the RAB model in the transport sector, which may be of interest to infrastructure funds and lenders already familiar with the regime from nuclear and other regulated infrastructure. 

At Budget, the government also approved the full business case for Forth Green Freeport, which aims to leverage £7.9 billion of investment over 10 years and create up to 16,000 direct jobs. A Memorandum of Understanding can now be signed with the Scottish Government, enabling the release of £25 million of government seed capital funding. Green energy and advanced manufacturing businesses located on the Freeport’s tax sites will benefit from a range of tax reliefs and incentives. The Freeport will boost UK production of clean energy and sustainable fuels, including offshore wind energy. 

In relation to aviation, the government is making rapid progress in enabling the delivery of an operational third runway at Heathrow by 2035. In October, the Department for Transport launched a review of the Airports National Policy Statement (ANPS) and in November identified the scheme promoted by Heathrow Airport Ltd as the scheme to take forward to inform the ongoing review of the ANPS. The government will consult on any amendments to the ANPS by July 2026. The Budget also affirmed that “Heathrow expansion will be entirely privately financed, with no cost to the taxpayer”. 

Other measures have been designed to offer support to transport users. These include the introduction of a one-year freeze of regulated rail fares – for the first time in 30 years – saving commuters on the more expensive routes more than £300 per year. As mentioned above, the Chancellor has also chosen to continue the freeze on fuel duty until September 2026 and retain the temporary 5p cut introduced by the previous government at the start of the war in Ukraine. 

Social and defence infrastructure

Beyond transport infrastructure, the Budget restated the government’s commitment to invest in new infrastructure across sectors such as social housing, health, education and defence. It announced plans for 250 new Neighbourhood Health Centres and upgrades to existing buildings through a combination of public sector investment and a new model of Public-Private Partnerships (currently being developed by the National Infrastructure and Service Transformation Authority). Privately financed projects and programmes – including PPPs – will also be considered for projects that decarbonise the public sector estate.  

With regard to the defence sector, the government plans to invest in accommodation with £1.5bn this Parliament and a total of £9bn over the next decade. It also aims to identify potential sites for the construction of 13 new munitions factories.  

Across education, the government has committed to expanding the School Rebuilding Programme, providing almost £20 billion investment from 2025‑26 to 2034-35. 

The government will continue to consider the ways in which private finance can support the delivery of wider infrastructure ambitions including leveraging private finance to help deliver the next generation of new towns.   

Digital infrastructure

In addition to its support for previously announced AI Growth Zones, the government notes that it is investing up to £2 billion between now and 2030 to build a modern public compute ecosystem, ensuring that this country’s start-up and research and development communities have the necessary access to cutting-edge public compute. This includes over £1 billion to expand the AI Research Resource programme 20 times by 2030, up to £750 million for a new national supercomputer service at the Edinburgh Parallel Computing Centre (due to come online in 2027), and an up to £100 million advance market commitment to purchase novel compute.   

Other measures

The government will launch a Strategic Asset Review to report before the next spending review, which will identify opportunities to monetise assets and address barriers to disposals. Both this and the value-for-money review into the maintenance of public sector assets will be informed by the Balance Sheet Framework, setting out for the first time a comprehensive approach to managing the assets and liabilities that the government holds on behalf of the taxpayer. Alongside this, HS2 Ltd is undertaking a sprint project that aims to identify and unlock opportunities for early release of land currently held for HS2 between London and Birmingham, around its stations and depot hub. This work is part of the reset of the HS2 programme and will support both regeneration and economic growth.  

Conclusion

Taken as a whole, the Autumn Budget 2025 combines tighter, more targeted sectoral taxation with emphasis on certain measures designed to unlock investment. For energy and infrastructure sector participants, the immediate task is to map these measures against project and portfolio pipelines - from upstream oil and gas, hydrogen, CCUS, and nuclear, through grid, transport, and social infrastructure, to digital and data centre investments - and to position early for the consultations, funding streams, and regulatory changes that will determine which projects move fastest in the next phase of the UK’s transition and growth story.