Energy firms have called on the UK Government to reduce the windfall tax as the price of oil and gas falls.

Offshore Energies, a trade body representing the sector told ministers that "when prices drop, it is fair that the windfall tax should fall away".

This comes after news reports indicated that the government was looking to offer energy companies reprieve from the tax with the Treasury insisting it keeps all taxes under review.

Previously, the government introduced the windfall tax to help fund schemes to lower energy bills amid the cost of living crisis.

Bournemouth Echo: (PA) The government introduced the windfall tax to fund energy bill schemes(PA) The government introduced the windfall tax to fund energy bill schemes (Image: PA)

Energy firms recently experienced a massive surge in profits as Russia's invasion of Ukraine along with other factors caused changes to the market.

Energy trade body says windfall tax 'damaged the confidence' of firms

Chief executive of Offshore Energies UK, David Whitehouse, said the windfall tax has "damaged the confidence" of firms.

"If this tax is changed, as conditions and prices have changed, that would be a positive move that would go some way to start rebuilding confidence," he added.

Such a move could allow firms to invest in new technologies such as offshore wind, hydrogen and carbon capture, according to Mr Whitehouse.

On Thursday, March 30, the government is expected to announce measures aimed at boosting the UK's energy security.

A source in Whitehall said the plans set out by the Energy Security Secretary Grant Shapps would focus on bringing down wholesale prices in the UK and in reducing energy bills.

The Financial Times reported that ahead of this move, the government has been discussing with firms about adjustments to the windfall tax if prices reach below a certain level.

Ed Milliband says Thursday's announcement will be 'giveaways to companies already making record profits'

However, shadow climate secretary Ed Miliband said these reports indicate that next week's announcement would be "Fossil Fuel Thursday".

He added it would see "giveaways to companies already making record profits, for a policy that will make no difference to energy bills or security, fleecing the public whilst trashing the climate."

While the Treasury insisted it does not comment on speculation it did say the windfall tax "strikes a balance between funding cost of living support from excess profits while encouraging investment".

Adding: "The more investment a firm makes into the UK, the less tax they will pay".