UK missed out on trillion-pound oil fund, Treasury reveals
Internal Treasury modelling shows the UK could have amassed a 1-trillion-pound sovereign fund if North Sea oil revenues had been invested like Norway's.
Stock photo for illustration only, not from the actual event
- The UK has launched an Energy Wealth Fund with £2bn diverted from the National Wealth Fund.
- Internal Treasury modelling reveals historical North Sea receipts could have grown to £1 trillion.
- Unlike Norway's fund which invests heavily in US tech abroad, the UK plan focuses on domestic green energy.
After waiting half a century, the United Kingdom finally possesses an oil fund. Chancellor John Healey announced the creation of the Energy Wealth Fund alongside the approval of the Jackdaw gas project on Wednesday, redirecting £2bn from the existing National Wealth Fund.
The absence of a sovereign wealth fund has long sparked economic debates across Britain, especially when neighbouring Norway amassed a $2.4tn war chest from the exact same North Sea waters. The question has grown more pressing during the same week the national debt hit £3tn for the first time.
"The proceeds of this oil and gas coming ashore now can be invested for the future generations."
John Healey, UK Chancellor
Stock photo for illustration only, not from the actual event
On Wednesday, Treasury officials calculated for the first time just how large that missing British fund could have been. The trillion-pound figure stems from internal modelling, assuming the UK's historical North Sea receipts of £200bn had been invested without withdrawals and grown at a rate comparable to Norway's.
Economists critical of the Margaret Thatcher era often argue that peak oil revenues were frittered away in pre-election tax cuts or wasteful government spending. Meanwhile, Norway's fund began in earnest in 1996, drawing down 3% of its value annually to support public budgets and prepare the nation for a post-oil economy.
Norway's Government Pension Fund Global exemplifies the immense power of long-term fiscal saving. Because the fund is mandated to invest abroad—particularly in major US technology companies—it avoids the economic pitfalls of domestic currency appreciation known as Dutch Disease. The UK's new fund, by contrast, intends to channel capital into domestic green energy, presenting distinct structural hurdles in matching historical overseas returns.
While the UK government promises to divert future revenues, the operational model diverges sharply from Oslo's. Norway mandates overseas investments and benefits from state-controlled stakes in energy firms, whereas the UK fund aims to deploy capital domestically toward green energy amidst dwindling North Sea production.
Source: BBC Business
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