Government expands the British Industrial Competitiveness Scheme

Last week, the Government announced that it would expand the British Industrial Competitiveness Scheme (BICS), which will now cut electricity costs for around 10,000 energy-intensive manufacturing businesses. In this article, we explore what the BICS is, why it is needed, and whether the Government’s recent decision goes far enough. 

What is the BICS? 

There are several factors which influence commercial energy prices, including the wholesale price of electricity and gas, network costs, and supplier charges. In the UK, the Government adds several non-commodity, policy costs to electricity bills to fund environmental and social policies. Policy costs, levied on commercial electricity bills, currently include the Renewables Obligation and Feed-in Tariffs, which help support the generation of electricity from renewable sources and the Capacity Market, which help to ensure that the UK has adequate supply. These policy costs can make up over a third of a business’s electricity bill. The BICS proposes to remove these policy costs for the most energy intensive manufacturing businesses, in order to support growth sectors within the Government’s Industrial Strategy. 

Why is it needed? 

The UK’s industrial energy prices are amongst the highest in the world, with electricity prices typically 50% higher than in France and Germany and up to four times higher than in the United States. Research by Policy Connect’s Manufacturing Commission found that these costs present an existential threat to the UK’s manufacturing sector, with some businesses reporting energy price increases of up to 1000% in recent years. Energy cost spikes have a particularly detrimental impact in energy-intensive manufacturing industries vital to the success of the Industrial Strategy, such as steel, cement, fertiliser, and ceramics. 

Is it enough? 

As proposed, the BICS would have provided support to around 7,000 energy-intensive manufacturing businesses. In its response to the BICS consultation, Policy Connect’s Manufacturing Commission was critical of the scheme’s initial narrow eligibility and the delay to its implementation in 2027, especially as conflict in the Middle East puts further pressure on businesses. Within the Manufacturing Commission’s recent report, Small Means Essential: why Britain’s manufacturing SMEs are vital for growth, the Commission agreed with Make UK’s costed proposal for expansion of the BICS and recommended that the Government should: 

1. Expand eligibility for the BICS to all manufacturers, or at least the 30,000 frontier manufacturing businesses in the Industrial Strategy and foundational industries, regardless of energy intensity or Standard Industrial Classification code. 
2. Bring forward implementation from 2027 to 2026, and  
3. Backdate payments for the most energy-intensive businesses to June 2025. 

Although Policy Connect welcomes the Government’s decision to extend the BICS to 10,000 manufacturing businesses (including an additional payment next year to backdate support from 2026), we consider that this does not go far enough. To deliver on the aims of the Industrial Strategy and prevent a contraction in the manufacturing sector, the scheme must provide support to all manufacturing businesses and especially all energy-intensive SMEs. We hope that the Government will heed the call of the manufacturing sector and extend the BICS further. 

You can read the Manufacturing Commission’s latest report here. This explores the challenges that manufacturing SMEs face associated with high energy costs in more detail. If you would like to know more about the work of the Manufacturing Commission, please contact Rob Allen Robert.Allen@policyconnect.org.uk