Nathan Bend, Strategic Account Manager at Sustainable Energy First explains why the Modern Industrial Strategy has concrete benefits.
If you’re in an energy-intensive sector, you won’t need an explanation why. Last year, energy-intensive UK businesses paid twice the European average in electricity costs. That’s a glaring disadvantage for UK plc – like lining up on the pitch for the cup final with six players on your team.
So it’s a relief that the strategy tackles this threat to our competitiveness head-on. The full version, presented to Parliament in June 2025, has a number of measures to reduce the burden on energy-intensive businesses.
BICS cutting bills
The British Industrial Competitiveness Scheme (BICS) will cut electricity costs for certain key sectors by £35-40 per MWh. It will do this by removing many of the additional costs on your bills, such as the Renewables Obligation charge or Capacity Market charges.
We don’t yet know which businesses will be eligible for BICS, but we expect the government to consult on it before the end of 2025. Early estimates suggest that over 7,000 businesses are likely to qualify. We do know that the new strategy represents a move towards smarter targeting of key parts of the economy. Talking of which…
Sharper sector targeting
2024’s Invest 2035 strategy picked out eight high-level sectors that are considered to have the greatest potential for the UK economy: the IS-8. The Modern Industrial Strategy refines this approach by identifying specific sub-sectors (now called “frontier industries”) within the IS-8.
Crucially, the strategy also takes geography into account, and which regions have the greatest growth potential. 10 city regions have been chosen: Greater Manchester, West Yorkshire, the West Midlands, Liverpool City Region, South Yorkshire, North East, West of England, Glasgow City Region, Cardiff City Region and Belfast City Region.
The plan is to get experts with local knowledge – to be known as Cluster Champions – to help make these areas and their IS-8 businesses more attractive to private investors.
Focusing on where stuff gets made is a step forward from simply identifying broad sectors of the economy and means that government help will be more locally targeted and useful. For example, rather than just talking about ceramics, the strategy names Stoke on Trent as a key area. As the methodology says, “all economic activity occurs somewhere.”
Supercharged support
The British Industry Supercharger has been in place since April 2024. It works by removing or reducing additional costs on the energy bills for energy-intensive industries (EIIs). These are:
- Levies to cover the costs of running the electricity grid (network charging costs)
- Levies to support the generation of renewable energy
EIIs get compensation for 60% of network costs. The government has launched a consultation proposing to increase that compensation up to 90%. For the renewable energy levies, the discount has been 100% for a while – and we know some businesses would struggle without the full exemption.
Clean Energy Superpower Mission
It sounds like something from the Marvel universe rather than government policy, but the Clean Energy Superpower Mission could be the most important measure of all. A lot of government support for energy intensive industries, now and in the past, boils down to letting some businesses pay fewer additional charges on their bills. This relief is often much needed, but it doesn’t do anything to bring down the wholesale cost of energy.
And of course, these charges exist for a reason – to help with the costs of maintaining the grid, generating renewable power and so on. When businesses in energy-intensive sectors get relief from these charges, other businesses and domestic customers pay more to cover the gap.
The Clean Energy Superpower Mission is about slashing everybody’s electricity bills, in a more financially sustainable way. The headline is that the government wants to double annual investment in clean energy so that it reaches £30bn by 2035. That’s backed by some serious funding—£14.2bn for Sizewell C, £2.5bn for fusion, £9.4bn for CCUS, and £1bn for supply chains. UK electricity prices are high by international standards because we’re still too dependent on gas for electricity generation. A big push on renewables will bring prices down.
There’s also a plan to speed up grid connections. The problem of delays in connecting generators to the grid has been on our radar for quite some time. The strategy promises a “Connections Accelerator Service” to support priority projects. There was a pledge to get this operational “at the end of 2025”, which seems unlikely – but I’m optimistic that we will see real action on this issue.
Linking with the EU where it makes sense
The strategy includes a promise to “strengthen our connections to the EU energy market”. Despite leaving the EU’s internal energy market after Brexit, we’re still physically connected to Europe through gas pipelines and electricity interconnectors. And we’re currently a net importer. Anything we can do to cooperate and align with the EU on energy removes friction and brings down costs for us.
Another key cost for energy-intensive businesses is the cost of carbon. Both the EU and the UK are bringing in a Carbon Border Adjustment Mechanism (CBAM) to ensure that overseas businesses pay for the carbon intensity of their products through import taxes. The EU’s CBAM will be here in 2026 and could potentially penalise UK firms who produce goods made through carbon-intensive processes: steel, fertiliser and so on. It’s a relief to see plans to work with the EU so that it’s possible to create CBAM exemptions. This will require linking up the EU’s Emissions Trading System with the UK ETS. That’s a fairly common-sense and straightforward move given how similar the systems are, but if we pull it off it could mean lower export taxes for UK firms and much simpler paperwork.
So yes, this is a clean energy strategy. But it’s also a competitiveness strategy. It’s about resilience, investment, and making the UK a more attractive place to do business across the IS-8.
In my job, I see businesses every day who are disadvantaged by their energy costs. I help them find solutions, but I’m looking forward to seeing my clients get out of survival mode to compete properly on the global stage. To find out how our team could help your business, get in touch.