Rachel Reeves Cuts Electricity Bills by 25% for 10,000 UK Manufacturers
Rachel Reeves has pledged to cut electricity bills by up to a quarter for Britain’s more than 10,000 manufacturers, in what Whitehall hopes will boost the country’s battered industrial base and consistent criticism that ministers have been slow to deal with the highest electricity costs in developed countries.
Speaking in Washington, where he attended the spring meetings of the International Monetary Fund, the Chancellor confirmed on Thursday that the British Industrial Competitiveness Scheme (BICS) will be expanded by 40 per cent, bringing an additional 3,000 firms under its umbrella. The scheme, first traced to last year’s Modern Industrial Plan, will exempt eligible businesses from the indirect costs of three green levies: Renewables Obligation, Supply Charges and the Energy Market.
Treasury officials put the amount of assistance at around £35 to £40 per megawatt hour, or up to £600 million a year if the scheme comes into effect in April 2027. Most importantly, ministers insist that no households or businesses outside the scheme will see their bills rise as a result, with costs met through a combination of changes within the energy system and Excher. Full details will be revealed in next year’s Budget.
In a concession to companies that have been trying hard to get help quickly, the Chancellor has also agreed to make payments that are past due in 2027, which matches the support producers would have received if the BICS had started to work from April 2026. The exemption from the Renewables Obligation and Feed-in Tariff on April 20 will remove the Cap2 taxes for Market 2 will release after that October.
Eligibility will span the length of the industrial spectrum, from metal distributors and automotive plants to small recyclers, plastics manufacturers, metal fabricators and pharmaceutical manufacturers. Aerospace companies, nuclear fuel processors and manufacturers of cooling and ventilation equipment are also expected to qualify. The subsidy will be calculated on a site-by-site basis, based on the amount of electricity used to produce eligible goods. Sites where less than 25 percent of energy is used for appropriate production will receive nothing; those between 25 and 50 percent will receive a partial exemption, and any area above 50 percent will benefit fully. Notably, the program does not differentiate between large companies and SMEs, a point likely to be welcomed by small firms in the supply chain who often find themselves excluded from previous industrial aid programs.
Ms Reeves said the move was part of the Government’s wider plan to bring “stability, keep costs down, and increase competition” at a time when the Middle East crisis has once again shaken global energy markets. “This Government has the right plan for the economy: supporting British industry, reducing energy costs, and building a strong, sustainable future,” he added, adding that the announcement would help manufacturers “compete, win and create good jobs across the country”.
The Business Secretary, Peter Kyle, put the move in response to the first complaint he heard when he visited the factory. “If global instability puts businesses under pressure, we will always do what is necessary to support them,” he said. “By extending the reach of BICS by 40 percent, we are taking a decisive step to address a startup problem that businesses face head-on.”
Business lobbies gave a fitting reception. Rain Newton-Smith, chief executive of the CBI, said the Chancellor had shown he was “listening to firms struggling with the volatility of energy markets around the world”, although he stressed that BICS should be seen as a “significant step” rather than a “job done”. Lasting change, he said, would require erasing policy costs from electricity debt entirely, increasing support for energy efficiency and accelerating the roll-out of renewables.
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, described the final design of BICS as a “huge victory” for the motor industry, saying it sent “a clear and immediate signal that we are open for business and a prime investment destination”. Shevaun Haviland, director general of the British Chambers of Commerce, welcomed the recall in particular, which the BCC had called for.
However, not everyone was satisfied. Stephen Phipson, chief executive of Make UK, delivered a more scathing report, warning that the relief coming in 2027 was cold comfort to manufacturers who are now renegotiating their contracts. “Manufacturers are looking down the barrel of a big increase in their energy bills this month,” he said. “Many cannot wait until 2027 to get help.” The UK is still operating under the highest industrial electricity costs of the developed world, he noted, and failure to act quickly risks “significant job losses and the relegation of a sector vital to our national security and resilience”, a sector that supports 2.6 million skilled jobs.
Thursday’s announcement follows a £420 million boost delivered on 1 April through the British Industry Supercharger, which increased the discount on electricity network costs for around 500 energy-intensive businesses from 60 to 90 per cent. Together with BICS, the ministers opposed these two plans which represent the most important intervention in industrial electricity prices in a generation.
A second consultation on the regulatory changes needed to bring the scheme to life closes on 14 May, with legislation expected to be on the statute book in the autumn. A full BICS update is penciled in for 2030. The full list of eligible SIC and HS codes is due to be published on gov.uk later today.
Whether the package is enough to stop the slow erosion of Britain’s industrial base, or, as Make UK fears, comes too late for companies already on the brink, will now be the defining question of the Chancellor’s industrial policy as the Budget approaches.
