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The UK oil and gas industry suffered its worst ever year for exploration in 2025, with investment set to plunge further, as companies shelved plans in the North Sea while they waited for clarity on the government’s tax plans.
Wood Mackenzie, the energy consultancy, said no exploration wells were drilled in UK waters this year, the first time there has been no fresh exploration activity in the basin since oil and gas was found there in the 1960s.
Investment, which was £4.4bn in 2025, is set to fall more than 40 per cent to just over £2.5bn next year, marking the lowest level since the UK oil industry was buffeted by high costs, industrial strife and rampant inflation in the early 1970s.
“Drilling is at an all-time low,” said Gail Anderson, Wood Mackenzie research director for the North Sea, who expects the number of North Sea operators to shrink further as consolidation continues, driven by a headline tax rate of 78 per cent.
While there was no new exploration, 36 appraisal and development wells were drilled in the North Sea, although this is half the figure for 2020, the first year of the coronavirus pandemic.
“Activity was terrible in 2025 because there was so much uncertainty,” said Martin Copeland, chief financial officer at North Sea oil and gas producer Serica.
However, executives and analysts said that while 2025 and 2026 likely marked a nadir, investment in UK waters would pick up in anticipation of a more generous tax regime that starts in 2030.
The UK North Sea is in long-term decline, with production falling from a peak of about 2.3mn barrels of oil a day in 1983 to 530,000 b/d, according to government data.
The oil majors that once operated there have sold down, merged their assets or exited entirely to pursue more lucrative opportunities, leaving the basin in the hands of smaller independent companies.
The industry blames the energy profits levy (EPL), introduced by the previous Conservative government in 2022, for accelerating the fall. The levy imposes an additional 35 per cent tax on profits when oil prices exceed $76 a barrel or gas prices go above 59p a therm.
Oil has traded below the threshold for most of 2025, but gas exceeded 140p a therm early in the year and has remained well above the level that triggers the levy.
Official forecasts show that EPL tax receipts are set to plunge from £2.9bn in 2024-25 to £300mn in 2029-30, as companies optimise their tax strategy or leave the basin.
“It’s the worst of the fiscal environments among all the countries that [we] operate in,” said Linda Cook, chief executive of Harbour Energy, one of the North Sea’s largest producers, adding that the UK industry was competing with “one arm tied behind its back”.
The Labour government has said that from 2030, when the EPL expires, additional tax will only be levied on revenues on oil sold above $90 a barrel and gas at 90p a therm.
“What has replaced the EPL is a very pragmatic system which will work for all parties,” said James Midgley, an oil and gas research analyst at Cavendish, adding that companies could start investing from 2027 in order to start production in 2030.
Copeland said Serica would target “quick and easy” opportunities for now, saying there were “probably things companies can do that are economically sensible and good for our shareholders”. But he also said the UK government had “missed a trick” by using the North Sea to drive economic growth.
But Cook at Harbour said the UK remained a hostile environment for oil and gas investment. Recent projects such as Equinor’s Rosebank development and Shell’s Jackdaw field have been hit by legal cases and the government has yet to rule on whether they can proceed.
“Every other country, when I visit, asks us what they can do to encourage us to invest more. In the UK, the discussion always feels like the opposite. I continue to struggle to understand why, as long as the UK needs oil and gas, it does not choose to be supportive of producing it domestically,” said Cook.
The UK government said it had set out a plan to build a “prosperous and sustainable future for the North Sea — with record investment to grow clean energy industries, while supporting the management of existing oil and gasfields” during the transition to green energy.
“We know oil and gas will be with us for decades to come, which is why a new permanent windfall tax will replace EPL when it ends, giving the sector and its investors the long-term certainty to plan, invest and support jobs.”
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Lloyds Banking Group is shutting an invoice financing service for small business customers as the UK’s biggest lenders pivot to focus on more lucrative corporate clients.
The UK’s biggest high street bank will close its invoice factoring service by the end of the year, according to two people familiar with the matter, in a blow to small enterprise customers operating on thin margins.
The move to end the service, under which Lloyds buys unpaid invoices from small businesses in return for the right to receive the payments from their customers, follows similar closures by other top lenders.
It comes as businesses confront rising costs after increases in the minimum wage and successive tax-raising budgets by chancellor Rachel Reeves.
“As cost pressures rise across employment, business rates and energy — and as interest rates fall — banks should take a more generous position to help small business owners access working capital,” said Craig Beaumont, executive director at the Federation of Small Businesses.
Invoice factoring is the process of selling outstanding customer invoices to a bank or finance firm at a discount in return for cash upfront. The service is generally used by smaller companies to smooth their cash flow and free up resources by outsourcing payment collection to an external agent.
Banks had initially moved into factoring in the hope of drawing small business customers and then cross-selling other more lucrative products.
But running a factoring business profitably can be difficult as it tends to be used by small and medium-sized enterprises, which do not generate significant profits for banks, while cross-selling has been limited, according to people in the industry.
Lloyds, which says its corporate purpose is “helping Britain prosper”, is the latest of the UK’s big four lenders to scale back its SME factoring as the banks focus on larger, more profitable corporate clients.
NatWest and Barclays closed their factoring businesses several years ago, according to people familiar with the matter. Meanwhile HSBC tightened its criteria for the service, limiting it to customers with more than £1mn in annual turnover.
Many small businesses rely on invoice financing products because of a wider problem with late payment by suppliers, said Beaumont.
Nathaniel Southworth, managing director of the North Yorkshire toy distributor KAP Toys, said he had used factoring facilities from several high street banks but that over the years lenders have imposed more stringent criteria around revenues and profits, which excluded firms like his.
“The mindset of traditional banks is that they would like a company’s finances to be nice, uniform and easily predictable,” he said. “I would love that to be the case as well. But the reality of business is it’s quite rarely like that and I think sometimes smaller businesses can feel shut out.”
Lloyds declined to comment. One person close to the bank said the invoice factoring division was modest in size and that Lloyds would continue to provide other similar services to customers to ensure they would not face significant disruption. The person added that the bank was growing its SME lending business and that its factoring products were used by less than 1 per cent of its SME customers.
HSBC said it was “committed to supporting small businesses . . . including helping them access the most cost-effective lending products for their needs”.
A person close to Barclays said the bank continued to offer other invoice financing services. A person close to NatWest said that its factoring unit had fewer than 1,000 customers by the time it closed in 2021 because of falling demand.
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Chinese offerings of asset-backed securities have hit a record high this year as cash-strapped local governments struggle to plug fiscal holes.
The number of deals in China involving sales of ABS — financial instruments based on the revenue streams of an underlying pool of assets such as property rentals or leases — reached 2,386 as of December 24, surpassing the previous record set in 2021, according to data provider Wind.
The rise in deals this year was driven by authorities at the provincial level and below, said a Chinese broker who advises companies on ABS issuance.
The value of new ABS deals in the country has totalled $2.3tn, the highest in four years, the Wind data shows.
Highly indebted local governments hope the sales will help solve liquidity problems stemming from a weakened economy and property market crisis and raise money for new investments to help them meet central government growth targets.
But the rush to securitise assets — some of which appear to have highly uncertain underlying value — is itself fuelling questions about the long-term sustainability of Chinese local government finances.
Such is the need for liquidity that one local leader, Li Dianxun, governor of central Hubei province, has coined the slogan: “Turn every possible state-owned resource into an asset, every possible state-owned asset into a security, and leverage all possible state-owned funds.”
“This emerging campaign reflects the surging need for local governments to address mounting debt and fiscal pressures,” said Yubin Fu, vice-president and senior analyst at Moody’s Ratings.
China’s local governments have been under pressure since the Covid-19 pandemic, which devastated their finances. A crackdown by the central government in Beijing on property developer leverage has also hit land sales that were previously a crucial source of revenue for provincial and city authorities.
Local governments’ official debt plus borrowings by their off-balance sheet financing vehicles — which raise money and build infrastructure on their behalf — soared to about 84 per cent of GDP in 2024 from 62 per cent in 2019, according to IMF figures released last year.
Beijing has helped settle local government financing vehicles’ maturing debt and improve liquidity conditions through a $1.4tn debt swap scheme, but liabilities associated with these vehicles remain vast at about $10tn, analysts say.
“Beijing wants to press the local governments to monetise their state assets to make them more efficient,” said Robin Xing, chief China economist with Morgan Stanley. “A lot of local governments do have state assets, but many of these are not running in the most efficient way to make money.”
Repackaging these holdings as asset-backed securities is attractive to local authorities, since it can bring forward the income they are expected to generate in the future while retaining state ownership.
Hubei’s Li spearheaded efforts to convert idle assets into cash in his previous role as deputy governor of neighbouring Hunan province. Under his leadership, Hunan began repurposing spaces under bridges and other unused properties as public amenities such as parking areas and sports grounds.
From 2022 to 2024, Li’s programme contributed nearly 11 per cent of Hunan’s total fiscal revenues, according to official data.
By the end of last year, Hubei had compiled an inventory of state assets that could possibly be securitised worth Rmb21.5tn ($3.06tn). Southern Guangdong province and central Anhui have also compiled inventories.
While local authority ABSs offer investors — mainly government-backed institutions such as banks, wealth management funds and securities traders — an implicit state guarantee, analysts have raised concerns about the quality of the underlying assets.
“All the high-quality assets were largely sold or securitised early on, leaving mostly lower-quality assets. With local government finances under pressure, authorities are exploring every possible avenue to reduce debt,” said the Chinese broker.
The government-owned public transport group in Hubei’s capital Wuhan, for instance, early this year sold a first Rmb600mn tranche of a planned total of Rmb4bn in securities backed by assets of the company that operates all regular bus routes in the city.
But the bus company is making a net loss, which deepened to Rmb821mn in the first half of 2025 from Rmb13mn for all of last year. The 10-year notes are already trading 5 per cent below their face value.
Another Wuhan state-owned group sold asset-backed securities based on a previously struggling property development, the Hongshan AI Building, for Rmb300mn last year. The group claimed that by adding unspecified artificial intelligence features it had changed the tower from a building with 30 per cent occupancy to an AI centre with three times as many tenants — including 60 AI companies.
When the Financial Times visited the address, office workers in the building said they could not identify new features that made it particularly suited to AI.
The tenants included several state-owned companies that had been relocated to the Hongshan building from other parts of a surrounding industrial park. There was also a tech company whose staff were mostly engaged in censoring posts on Kuaishou, a short-video online platform, work that is generally regarded as low-skilled.
In another case, the Wuhan city government-owned Bishui Group turned a former underground flood chamber into a wedding centre — the kind of move that fits Li’s programme of “turning every possible state-owned resource into an asset”.
The facility includes a “Monet Park” by the riverside for banquets and a Tang Dynasty-style reception hall underground.
Analysts said that for local governments, tapping the ABS market offers a new funding channel as China’s slow domestic economy makes it ever more difficult to raise money.
But there is also a risk that if low-quality projects are securitised, they could become another source of financial vulnerability for local governments that Beijing has spent huge sums bailing out.
At the Hubei marriage facility, for instance, there were no customers in sight in the vast facility during a recent visit. Marriages in Hubei are falling, reflecting a broader demographic decline across the country.
“The peak time was before 2022,” said a photographer from the wedding photo studio. “Now after Covid and weak consumption, people are less inclined to spend lavishly on weddings.”
Data visualisation by Haohsiang Ko in Hong Kong. With additional contributions from Cheng Leng and Tina Hu in Beijing
Europe’s hopes of a return to growth in 2026 rest largely on Germany’s €1tn debt-funded spending drive on infrastructure and defence, according to a Financial Times survey.
Yet the 88 economists polled are split over whether Berlin’s fiscal push will deliver a “European renaissance” or fade amid entrenched structural weaknesses and geopolitical uncertainty.
With its largest economy stuck in recession since late 2022, Europe needed a return of “animal spirits” to power a recovery driven by domestic demand, said Nick Kounis, chief economist at ABN Amro.
Eurozone growth is expected to slow by 0.2 percentage points next year to 1.2 per cent in 2026, before picking up to 1.4 per cent in 2027, according to the FT survey. The forecast broadly matches the European Central Bank’s latest staff projections.
Last year’s prediction of 0.9 per cent growth for 2025 proved too downbeat, after the bloc’s economy expanded by 1.4 per cent. Concerns voiced by economists in last year’s FT poll that the ECB had been too slow to cut rates now appear misplaced. “Overall we have been positively surprised about growth resilience in 2025,” said Pia Fromlet, an economist at SEB.
But economists were unsure “whether the fiscal impulse can translate into durable domestic momentum rather than merely cushioning external shocks”, said Léa Dauphas, chief economist at TAC Economics. TD Securities analyst James Rossiter predicts a “tug of war” between geopolitical uncertainty and expansive fiscal policy.
Optimists expect that underlying resilience will be reinforced by fiscal stimulus next year. Jan von Gerich, chief strategist at Nordea and among the most bullish respondents with a 2026 growth forecast of 1.5 per cent, said “private consumption has a lot of potential to surprise to the upside”.
Reijo Heiskanen, chief economist at Finnish lender OP Pohjola, is even more sanguine, predicting a “comeback of [Europe’s] North”.
While views on growth are split, there is broad consensus that the ECB has brought inflation back under control. A large majority of economists expect it to meet its medium-term 2 per cent target in 2027, after undershooting slightly at 1.9 per cent in 2026.
Three-quarters of respondents expect the ECB to keep its key deposit facility rate unchanged at 2 per cent through the end of 2026. By the end of 2027, economists on average foresee a single rate rise to 2.25 per cent.
Looking ahead, growth would “hinge less on monetary policy and more on fiscal execution, confidence and progress on structural reforms”, said Sabrina Khanniche, an economist at Pictet Asset Management.
But not everyone is convinced that Berlin can deliver. “Increased government spending will mechanically lift German growth, but the key question is whether or not it translates into a broader recovery,” said Henry Cook, an economist at MUFG Bank.
Sceptics warn that billions of euros in new borrowing could end up funding welfare and other current spending rather than fresh investment, while the money allocated to defence might have only a limited impact on growth.
“The optimism that greeted Friedrich Merz’s announcement earlier this year has faded in recent months,” said Ben Blanchard, an analyst at Absolute Strategy Research.
“Anyone expecting a significant bounce in Germany’s economic fortunes in 2026 is likely to be disappointed,” warned Aberdeen economist Felix Feather.
At the same time, large parts of Europe’s industrial base are under mounting pressure from US President Donald Trump’s 15 per cent tariff rate and intensifying competition from Chinese rivals, leaving consumers rattled and reluctant to spend.
While US tariffs “so far have not had a meaningful negative impact on Eurozone growth”, said HSBC euro area economist Fabio Balboni, “we might only have seen the tip of the iceberg”. A narrow majority of poll respondents believe that more than half of the overall negative impact from the tariffs has already materialised.
Apolline Menut, economist at French asset manager Carmignac, warned about the fierce competition from Chinese exporters threatening to “further hollow out” EU industry. The bloc as a whole and individual governments were pursuing a “too-little-too-late approach” to deal with an intensifying “China shock”, she said.
A bursting of what some economists describe as an “AI bubble” in American equity markets could also weigh on Europe’s growth. “A sharp correction in US tech valuations remains the biggest global risk,” warned Christian Schulz, chief economist at Allianz Global Investors.
Steep falls in US equities and the dollar would “reverberate also through Europe”, potentially pushing up borrowing costs for governments and companies.
“The risk of a financial crisis of some sort that spills over into the US economy and the financial sectors and economies of other countries is high and rising,” said John Llewellyn, former OECD chief economist and partner at advisory firm Independent Economics.
But some economists sketch more optimistic scenarios, including an end to the war in Ukraine — or at least a durable ceasefire. If a peace deal were “credible and not unfavourable to Ukraine”, it could “significantly reduce geopolitical uncertainty and improve confidence”, argued Christophe Boucher, chief investment officer at ABN AMRO Investment Solutions.
In that scenario, energy prices could fall while investment and exports rise. Combined with fiscal stimulus from government spending programmes and a potential reversal of households’ high saving rates, this could even trigger a “virtuous cycle” and a “European renaissance”, said Reinhard Cluse, an economist at UBS.
Additional reporting by Alexander Vladkov in Frankfurt
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An internal family conflict is roiling McCain Foods, the world’s largest producer of frozen french fries, as the daughter of its co-founder seeks a payout of more than C$1bn (US $725mn) to leave the privately held group.
Three decades after McCain Foods’ founders fought a bitter succession battle over the company, the next generation is now locked in a new dispute over the global empire, a top supplier to McDonald’s with annual revenue of C$16bn.
Eleanor McCain, a 56-year-old Toronto musician, wants to sell her stake to focus on “philanthropy and for portfolio diversification and estate-planning purposes”, her spokesperson said in a statement to the Financial Times.
But other family members do not accept her valuation of her stake, although negotiations remain ongoing, according to a person familiar with the governance structure.
It is the latest flashpoint in an intergenerational conflict involving multiple branches of rich and influential siblings and cousins, who remain scarred by a costly court battle that tore the family apart in the 1990s.
Dimitry Anastakis, a professor at the University of Toronto’s Rotman School, described it as “one of the deepest schisms in Canadian business history”.
Eleanor’s father, Wallace McCain, who co-founded McCain Foods in 1957 with his brother Harrison, built a global frozen food company that made them one of the richest families in the country.
“One in every four fries in the world is a McCain Foods fry,” according to the company website.
The brothers’ “brutal” clash over strategy and control triggered a three-year court fight that ultimately saw Harrison’s side win. Legal costs exceeded C$20mn, and members of the Wallace branch later went on to take control of Maple Leaf Foods, he said.
While Eleanor McCain has no role in the daily running of McCain Foods, her brother Scott McCain is chair of the company.
McCain Foods is governed through a two-tier structure, with a family holding company overseeing a separate operating board that includes independent directors.
It was designed to insulate management from family disputes but is “somewhat complicated”, according to a company history.
That structure must now determine how Eleanor McCain’s stake is valued, or risk another lengthy court battle.
“To effect an exit, Ms McCain is not demanding anything. She is simply exercising her unrestricted right to sell her shares, the exact same right available to all other shareholders in the company,” the statement said. “(Eleanor) has consistently engaged constructively, in good faith, and would like to conclude this matter in a fair, timely and confidential fashion.”
A friend of Eleanor McCain, who spoke on the condition of anonymity, said her desire to exit raised complicated questions about the family business structure. “There’s a lot of emotion, this business was co-founded by her dad,” the friend said. “It is a big thing to walk away from.”
McCain secured the contract to supply McDonald’s continental European and UK restaurants with McCain-made fries in 1977. But success and fortune also brought challenges for the family.
Court battles over the years have revealed details of their lavish lifestyle and fortune, including net worth in the hundreds of millions of dollars, multiple homes and boats and eye-popping bills for private school tuition, landscaping, yoga and pilates coaching.
Eleanor McCain’s divorce from her husband Jeff Melanson in December 2017 generated scrutiny during a two-year legal fight over whether he had “tricked her” into marrying him.
Court documents showed her net worth was C$365.8mn when she sought an annulment of the marriage, to avoid paying the C$5mn agreed in their prenuptial agreement.
Another family friend of Eleanor, who also spoke on condition of anonymity, told the Financial Times no one wants a repeat of the past where the buyout ends up in a messy public court battle, adding he hoped “it can be resolved without too many lawyers”.
Tony Maiorino, director of the Royal Bank of Canada’s family office services, said family-run businesses often end up in disputes over equity, leadership and vision if proper governance structures are not in place.
“You’re in a situation where there’s an opportunity for that complexity to lead to poor outcomes,” he said.
A representative of the McCain family declined to comment.
