The UK government’s latest attempt to bolster industrial competitiveness has prompted a mixed response from businesses and trade unions, with critics questioning whether the measures go far enough to address long-standing structural challenges—particularly high energy costs.
Limited Relief for Selected Industries
Ministers have described the British Industrial Competitiveness Scheme (BICS) as a “bold” intervention designed to reduce electricity costs for manufacturers by up to 25%. However, the support is narrowly targeted at firms operating within eight priority sectors identified under the government’s modern industrial strategy.
This selective approach has drawn criticism. Gary Smith, general secretary of the GMB union, argued that gas-intensive industries—such as ceramics and brick manufacturing—have been overlooked. He described the omission as “a total disgrace”, reflecting broader concerns that traditional sectors are being sidelined in favour of newer industries.
Employer groups have broadly welcomed the initiative but with caution, often characterising it as insufficient when set against the scale of the challenge. Phrases such as “a drop in the ocean” have been widely used.
Financial Impact and Operational Complexity
The scheme is expected to cost more than £600 million annually, covering around 10,000 companies. While this represents an expansion from the 7,000 firms initially proposed, the overall financial commitment remains modest in the context of industrial energy costs.
There are also practical complexities. Eligibility is not determined solely by sector but also by the energy intensity of specific product lines. In effect, the scheme targets not just industries but individual outputs within those industries.
Firms that qualify will receive relief from three policy-related costs embedded in electricity bills, including two environmental levies. The total benefit could reach up to £40 per megawatt hour. Additionally, although the scheme formally begins in April next year, it includes a retrospective element, allowing businesses to claim backdated support.
Recognition of Structural Energy Challenges
Despite its limitations, BICS represents a notable shift in government rhetoric. For the first time, there is clear acknowledgement that the UK’s high industrial energy prices—among the highest in the developed world—are undermining competitiveness and economic growth.
The policy also signals an ambition to bring electricity costs for key sectors closer to European averages. This aligns with long-standing concerns raised by manufacturers, particularly in comparison with countries such as Germany, where industrial energy support is more extensive.
Reforming Energy Policy Costs
A central feature of the scheme is its focus on reducing policy-related charges on energy bills. These costs, which include environmental levies and carbon pricing mechanisms, have been identified as a major contributor to elevated electricity prices.
The government has confirmed plans to abolish the carbon price support mechanism—a levy on power generators that is ultimately passed on to consumers. While this move is intended to ease costs, its delayed implementation, not taking effect until April 2028, has raised questions about urgency.
Broader Debate Over Funding the Energy Transition
At its core, the issue extends beyond a single scheme. The debate centres on how the UK funds its transition to net zero and invests in new energy infrastructure.
In many European countries, a larger share of these costs is absorbed through general taxation, helping to shield industry from price pressures. In contrast, the UK has historically placed a greater burden on energy bills, increasing costs for businesses.
BICS suggests a partial shift in this approach, acknowledging that some rebalancing is necessary to maintain industrial competitiveness. However, the scale of the intervention remains limited.
Fiscal Constraints Limit Ambition
A more expansive scheme—potentially costing several billion pounds—could provide broader relief across the industrial base. Yet such an approach appears unlikely under current fiscal conditions.
Treasury officials are reportedly sceptical about whether a wider programme would generate sufficient economic returns through increased growth and tax revenues. This caution has constrained the government’s willingness to extend support beyond a tightly defined group of sectors.
Conclusion
The British Industrial Competitiveness Scheme marks a step towards addressing the UK’s high industrial energy costs, but its limited scope and scale have tempered expectations. While it signals a growing recognition of structural challenges, many businesses remain unconvinced that it will deliver the transformative impact needed to strengthen the UK’s industrial base in an increasingly competitive global market.
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