UK manufacturers are among the businesses most exposed to high and volatile energy costs, with energy-intensive production making electricity prices an important influence on margins, competitiveness and future investment.
Against a backdrop of continued cost pressure, a new government scheme could offer some welcome relief. Applications for the British Industrial Competitiveness Scheme (BICS) opened on 1 October 2026, with eligible manufacturers potentially benefiting from lower electricity costs from April 2027. The application window runs for just two months, closing on 30 November 2026.
The government has designed BICS specifically to tackle industrial electricity costs and improve the competitiveness of British manufacturing. It estimates that more than 10,000 manufacturers could see their electricity bills reduced by up to 25% through the scheme.
BICS will provide eligible manufacturers with exemptions from the indirect costs of the Renewables Obligation, Feed-in Tariffs and Capacity Market. Government guidance estimates that the scheme could reduce electricity costs by up to £40 per megawatt hour (MWh).
The exemptions will be introduced in stages, with relief from Renewables Obligation and Feed-in Tariffs costs beginning in April 2027, followed by Capacity Market costs in October 2027.
To qualify, businesses must be registered at Companies House, operate in an eligible sector determined through Standard Industrial Classification codes, manufacture an eligible product determined through Harmonised System (HS) codes and use at least 33 MWh of grid-supplied electricity annually at the manufacturing site for which support is being claimed. At typical business electricity rates, that equates to an annual bill of between £7,000–£9,000, so the usage threshold is within reach of many smaller manufacturers.
The government has introduced an online eligibility checker to help businesses establish whether they are likely to qualify. Applicants will also need to provide supporting evidence, including electricity bills covering six consecutive months and details of the products manufactured at each site.
With the application window closing on 30 November, manufacturers should begin considering their eligibility now rather than waiting until applications open.
BICS should not be considered in isolation. Manufacturers with particularly high energy consumption may already qualify for support through the Energy Intensive Industries (EII) regime, which provides exemptions from several electricity policy costs. Government guidance is clear that businesses cannot receive support through both BICS and the EII scheme, so manufacturers should establish which they are eligible for and which best suits their circumstances.
Additional support is available through the Network Charging Compensation Scheme. From 1 April 2026, compensation increased from 60% to 90% of eligible network charging costs for qualifying energy-intensive businesses. As compensation is paid in arrears, the first payments reflecting the increased rate are expected after April 2027.
These schemes have different eligibility requirements and mechanisms, making it important for manufacturers to understand which forms of support may apply to their operations and how they interact.
For manufacturers, taking a joined-up view of energy expenditure, tax relief, funding, investment and reporting can help identify opportunities that may be missed when each area is considered in isolation.
Support with energy bills is only one side of the equation, with manufacturers also considering whether investment could help improve productivity, efficiency and longer-term cost control.
Capital allowances, including the Annual Investment Allowance (AIA) and full expensing, can provide tax relief on qualifying expenditure on plant and machinery. Under HM Treasury's full-expensing rules, companies can claim a 100% first-year allowance for qualifying plant and machinery, while qualifying special-rate assets can benefit from a 50% first-year allowance. Special-rate assets include integral features of buildings and structures, solar panels and long-life assets (those with an expected life of at least 25 years). For most SMEs, the £1 million AIA also gives 100% relief on special-rate expenditure, so the lower 50% rate typically only matters for spending above that level.
This makes tax planning an important consideration when manufacturers are evaluating capital expenditure and deciding how and when to invest.
Access to finance can also support investment. The Growth Guarantee Scheme, administered by the British Business Bank, provides a range of finance facilities of up to £2 million per business group for eligible UK businesses. The government announced a significant expansion of the scheme in July 2026, intended to increase SME access to finance.
Bringing together investment decisions, financing and available tax relief provides manufacturers with a clearer picture of the true cost and potential return from planned expenditure.
It is equally important that manufacturers understand how energy expenditure is affecting their financial performance.
Where energy costs are not sufficiently visible within management information, businesses can find it more difficult to monitor changing costs, understand their impact on production and margins, and quantify the benefits of energy-efficiency investments.
Clearer reporting can help businesses identify which production processes are particularly energy-intensive, assess the financial case for new equipment and understand how changes in electricity costs could affect future profitability.
Better visibility can support budgeting and investment decisions while also helping manufacturers prepare for the evolving sustainability reporting environment.
The government finalised the UK Sustainability Reporting Standards, UK SRS S1 and S2, in February 2026. The standards are currently available for voluntary use, while the government and Financial Conduct Authority consider whether requirements should be introduced for certain UK businesses to report against them.
For manufacturers facing continued energy cost pressure, the opportunity is therefore wider than any individual scheme.
BICS provides a timely reason to review electricity expenditure, but the wider value lies in understanding how energy costs influence profitability, investment decisions and longer-term business plans.
Taking a joined-up approach to energy support, capital investment, financing, tax relief and management information can help businesses identify where immediate savings may be available while supporting longer-term investment decisions.
As part of Kinbrook Group, Duncan & Toplis combines strong local relationships with access to a broader network of specialist expertise, helping manufacturers draw on the right advice as their needs evolve. To discuss BICS eligibility or the wider implications of energy costs and investment for your manufacturing business, get in touch or contact your usual Duncan & Toplis adviser.
