Gas producers in the UK are set to receive a £500m tax break, after a government treasury decision, affirming commitment to gas production.

After strong lobbying the government announced that it will exempt the first £500m of income from new shallow gas fields in UK waters from the supplementary 32 per cent tax rate.

While the wind power subsidy cut remains a well documented 10 per cent, there was a continuing fall out from the government’s midweek announcement.

Shares in Drax Group, which has been planning to transfer its flagship power station from coal-fuelled to biomass, fell 16 per cent as traders felt the proposed green energy subsidies were not as generous as expected.

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