How BICS could reshape UK manufacturing energy costs
What is BICS?
The British Industry Competitiveness Scheme (BICS), introduced in 2025 through the UK’s Modern Industrial Strategy, aims to support UK manufacturing businesses in high potential sectors by reducing rising electricity costs and unlocking growth and investment.
This supports the UK Government’s wider ambition to boost global competitiveness, develop clean power supply chains, strengthen economic security and reach net zero by 2050.
For manufacturers, the real test will be how quickly and effectively BICS translates policy ambition into tangible cost relief and improved investment certainty.
Why UK electricity prices are so high
Wholesale electricity prices in the UK are amongst the highest in Europe. This is driven primarily by the UK’s reliance on natural gas for electricity generation – accounting for over 30% of generation – alongside a broader dependence on imported energy. In 2025, 43.5% of the UK’s energy was imported, a level that has remained stable since 2024. However, domestic energy production in 2025 continued to decline, reaching levels around 68% lower than in 1999, when UK production peaked, further increasing our reliance on imports.
This means UK energy prices are closely linked to foreign markets, leaving businesses and households exposed to global energy supply shocks, which has contributed to two major energy crises in the past five years.
First, the war in Ukraine in 2022 exposed the UK’s reliance on imported energy and saw electricity prices soar. More recently, conflict in the Middle East, disrupting trade flows of oil and natural gas through the Persian Gulf, has threatened further spikes to electricity prices which have yet to fully recover from the impacts of 2022.
Significant progress has been made to increase the UK’s energy independence through electrification and the expansion of renewable energy capacity. Renewable generation reached a record high of 52.5% of total electricity production at the end of 2025. Efforts to expand this capacity have received increased attention as part of the Clean Power 2030 goal to generate at least 95% of the UK’s power from clean sources.
The energy cost landscape for UK manufacturers
Despite progress in domestic renewable energy generation, energy intensive industries (EII) have been significantly impacted by changing energy dynamics. Manufacturers in the UK have been squeezed by electricity price spikes and indirect energy transition costs passed on by generators.
In addition, the legacy impact of Carbon Price Support, which placed a relatively high price on carbon emissions as part of historical efforts to reduce reliance on coal-fired power stations, and alongside a lack of discounts for EIIs in the UK compared to EU counterparts, has contributed to the UK’s comparatively high electricity costs.
ONS data shows UK EII output at a 35-year low at the end of 2024. Output fell by 33.6% between Q1 2021 and Q4 2024, with a clear turning point in 2022 following the Russian invasion of Ukraine.
While more recent ONS production data shows manufacturing output increasing by 1.2% over the three months to February 2026 compared with the three months to November 2025, Make UK’s Q1 2026 Manufacturing Outlook suggests that weakening domestic demand, rising costs and energy price shocks linked to the ongoing conflict in the Middle East are impacting operations and investor confidence.
What is the UK doing to address these costs?
The importance of manufacturing businesses and their struggles with high energy costs is not lost on the UK Government. Reliefs for EIIs, such as the EII Compensation Scheme, the British Industry Supercharger (BIS), and the Network Charging Compensation (NCC) Scheme, were introduced to reduce energy costs and offset the impacts of the clean energy transition, including indirect emissions costs under the UK Emissions Trading Scheme and network charging costs. However, these schemes are relatively narrow in scope – for example, BIS only applies to around 550 companies – and have not delivered the strategic competitive advantages envisioned for UK EIIs, with electricity prices remaining high relative to peers.
To address these limitations, the UK’s Modern Industrial Strategy, released in June 2025, introduced BICS – a scheme designed to work in tandem with existing reliefs, broaden the range of eligible companies that could claim reliefs, and in doing so support key industry growth and reduce barriers to investment into the UK.
How BICS works
Following the announcement of BICS, the UK Government consulted with industry. Outcomes from the consultation, released in April 2026, show that a significant majority (72%) of the 288 respondents believe BICS will have a positive impact on the British energy system.
Central to the consultation was a focus on eligibility. The most notable change from the original BICS proposal is that eligibility will now be based on sector-level electricity intensity, rather than business-level electricity intensity.
As a result, the estimated number of eligible companies has increased by 40%, from 7,000 to c.10,000 eligible companies, determined by whether they:
- Operate within eligible manufacturing frontier industries within the IS-8 or in a foundational manufacturing industry that inputs into their value chain, as defined by eligible SIC4 codes; and
- Manufacture at least one eligible product, as defined by eligible HS6 codes.
Under BICS, eligible businesses will be exempt from paying the indirect costs of renewable energy transition schemes including the Renewables Obligation (RO), Feed-in Tariffs (FIT), and the Capacity Market (CM), and can expect savings of up to £40/MWh, prorated by the proportion of their manufacturing activities linked to eligible products.
Beyond BICS: long-term energy strategy and competitiveness
While these reliefs can be significant for many eligible UK manufacturing companies, BICS and similar schemes should be seen as a signal to prioritise decarbonisation and energy efficiency, not a standalone solution to curtail rising electricity prices.
Recent energy crises have underscored that the UK’s global competitiveness will depend on an energy strategy focused on security and independence. This was reflected in April 2026 when the Energy Secretary set out what he described as the ‘Era of Clean Energy Security’, framing the need to de-link the UK’s electricity prices from volatile natural gas markets and link them more firmly to the growing amount of domestically produced renewable and clean energy sources.
Manufacturers are well positioned to leverage these reliefs to provide greater financial flexibility to integrate more clean technologies and renewable energy into their operations, and improved energy efficiency, while strengthening long-term resilience and competitiveness.
What BICS means for manufacturers in the UK
With BICS set to come into effect in April 2027, following a second consultation on scheme delivery, manufacturers will need to evaluate eligibility and develop processes to collect the required data, such as production records, output data, and energy consumption details. While detailed guidance is expected in Autumn 2026, it is important that businesses begin to review the availability and quality of their data as soon as possible in preparation for the scheme.
Beyond this, a review of BICS is planned for 2030 and is likely to consider how eligibility and exemption levels should be linked to the energy efficiency improvements or flexibility-ready investments that companies make, a proposition supported by a third of consultation respondents.
Ultimately, this means that manufacturers will need to look beyond short-term cost relief and consider how energy strategy and decarbonisation are embedded across their business, including the need to:
- Track and reduce carbon emissions across the value chain.
- Develop robust, delivery-focused decarbonisation and transition plans.
- Assess how sustainability-related risks could impact business resilience.
- Proactively analyse and engage with stakeholders to manage value chain risks and emissions.
How we can help your manufacturing business
RSM can support your business across the full BICS journey, from evaluating eligibility to developing the necessary processes and procedures to validate eligibility as part of business-as-usual activities. Beyond BICS, we can also help to improving your sustainability performance, strengthen operational resilience, and support informed decision-making as your business navigates the energy transition.
If you would like to understand your eligibility for BICS or the cost impact on your business, please contact David Hough, Jake Salpeter or your usual RSM contact.