Rachel Reeves has pledged to cut electricity bills for more than 10,000 UK manufacturers by up to a quarter. Whitehall hopes the move will bolster the country’s struggling industrial base and makes it clear that ministers have been slow to address the highest energy costs in the developed world.
In Washington, where she is attending the Spring Meetings of the International Monetary Fund, the Chancellor confirmed on Thursday that Britain’s Industrial Competitiveness Program (BICS) will be expanded by 40 percent, bringing an additional 3,000 companies under its umbrella. The scheme, first introduced in the Modern Industrial Strategy last year, will exempt qualifying companies from the indirect costs of three legacy environmental levies: the renewable energy obligation, feed-in tariffs and the capacity market.
Treasury officials put the value of the relief at around £35 to £40 per megawatt hour, or up to £600 million a year once the scheme comes into force in April 2027. Crucially, ministers insist that neither households nor businesses outside the scheme will see higher bills as a result, as the costs will need to be covered by a mix of changes to the energy system and Treasury funding. Full details will be set out in next year’s budget.
In a concession to businesses who have campaigned vigorously for immediate relief, the Chancellor has also agreed to a one-off backdated payment in 2027, equivalent to the support manufacturers would have received if BICS had been operational from April 2026. Exceptions to the renewable energy obligation and feed-in tariff levies will come into force from April 2027, with exemptions for the capacity market from October.
Eligibility extends across the entire industrial spectrum, from sprawling steel mills and automobile plants to smaller recycling operations, plastics manufacturers, metal processors and pharmaceutical manufacturers. Aerospace companies, nuclear fuel processors and refrigeration and ventilation equipment manufacturers are also expected to qualify. Relief is calculated site by site based on the proportion of electricity used to produce eligible goods. Locations where less than 25 percent of the electricity is used for qualified production receive nothing; those between 25 and 50 percent receive a half exemption, and all locations above 50 percent benefit fully. Notably, the scheme makes no distinction between large companies and SMEs, a point likely to be welcomed by smaller companies in the supply chain, which were often excluded from previous industrial aid schemes.
Ms. Reeves said the move was part of the government’s broader efforts to “ensure stability, keep costs down and increase competitiveness” at a time when the Middle East crisis is once again shaking global energy markets. “This government has the right plan for the economy: supporting British industry, driving down electricity costs and building a stronger, more resilient future,” she said, adding that the announcement would help manufacturers “compete, win and create good jobs across the country”.
Business Minister Peter Kyle described the move as a response to the most common complaint he hears during factory visits. “When global instability puts pressure on businesses, we will always do what is necessary to support them,” he said. “By expanding the reach of BICS by 40 percent, we are taking decisive action to address the biggest problem facing businesses.”
Business lobbies offered a qualified reception. Rain Newton-Smith, chief executive of the CBI, said the chancellor had shown she had “listened to businesses grappling with volatility in global energy markets”, but stressed that BICS should be viewed as “an important step” rather than “work done”. For lasting reform, she argued, political costs must be completely removed from electricity bills, energy efficiency support expanded and the introduction of renewable energy accelerated.
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, called BICS’ final design “a major win” for the motor industry and said it sent “a clear and immediate signal that we are open for business and a world-class destination for investment”. Shevaun Haviland, director general of the British Chambers of Commerce, particularly welcomed the backdating advocated by the BCC.
However, not everyone was happy. Stephen Phipson, chief executive of Make UK, delivered the strongest response, warning that relief in 2027 would be little consolation to manufacturers who are now renegotiating their contracts. “Manufacturers face huge increases in their energy bills this month,” he said. “Many simply cannot wait until 2027 for relief.” The UK still suffers from the highest industrial electricity costs in the developed world and unless immediate action is taken there is a risk of “significant job losses and further deindustrialisation of a sector vital to our national security and resilience”, a sector that supports 2.6 million skilled jobs.
Thursday’s announcement follows the £420 million increase provided on April 1 by the British Industry Supercharger, which increased the discount on electricity network charges for around 500 of the most energy-intensive businesses from 60 to 90 percent. Together with BICS, ministers argue that the two systems represent the most significant intervention in industrial energy pricing in a generation.
A second consultation on the regulatory changes needed to make the scheme operational closes on May 14. The legislation is expected to be added to the statute book by the fall. A full review of BICS is planned for 2030. The full list of permitted SIC and HS codes is due to be published on gov.uk later today.
Whether the package will be enough to halt the slow erosion of Britain’s industrial base, or whether, as Make UK fears, it will simply come too late for companies already on the brink, will now become the key question for the Chancellor’s industrial policy ahead of the Budget.
