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A Manufacturer’s Guide to the Modern Industrial Strategy

What does the Modern Industrial Strategy mean for UK manufacturers? See the key energy, funding and skills support, and check your BICS eligibility.

Millie Palmer

The Modern Industrial Strategy is the UK government's long-term plan for growing the economy, published on 23 June 2025. It identifies the sectors the government wants to support, and sets out measures to improve conditions for the businesses in them. One of its flagship commitments is lower electricity costs for manufacturers, among other specific supports for homegrown business.

What does the strategy aim to do?

The headline of the strategy is making it easier to do business in the UK, both domestically and for international investors.

The strategy's stated aim is to make Britain the best place to do business, by encouraging investment, creating skilled jobs, enabling scale up, and removing barriers to business. It does this by focusing support on sectors with the greatest potential for growth.

Energy costs are a recurring theme. UK industrial electricity prices are high compared with those in many competing countries, which affects where manufacturers choose to invest and expand. The strategy responds by committing to cut electricity costs for eligible manufacturers by up to 25% from 2027.

Other goals include investment in UK innovation regions and clusters, specific financial supports for high-potential sectors, and reducing admin and regulatory burdens.

What are the eight growth-driving sectors?

The strategy singles out eight sectors, often shortened to the IS-8:

  • Advanced Manufacturing
  • Clean Energy Industries
  • Creative Industries
  • Defence
  • Digital and Technologies
  • Financial Services
  • Life Sciences
  • Professional and Business Services

Not all of these are manufacturing sectors, but several have large manufacturing components. Advanced manufacturing includes automotive, aerospace and electronics, while life sciences includes pharmaceutical production. Defence and clean energy supply chains also involve significant manufacturing.

So, what specific supports are available to manufacturers?

Energy relief schemes

Energy-intensive firms paid twice the European average in electricity in 2025, not to even mention the United States. This is a huge barrier for the advancement of the UK manufacturing sector, so the government is taking action. Energy prices are not the only block to competing industrially; grid connection delays also impact UK manufacturers and the move to Net Zero.

The main interventions are:

  • The British Industrial Competitiveness Scheme (BICS), which gives 10,000 manufacturers in Great Britain up to 25% off their electricity bills by cutting out the policy costs of a bill (the Renewables Obligation, Feed-in Tariffs and Capacity Market levies).
  • The British Industry Supercharger package: this includes an uplift of 60% to 90% for the Network Charging Compensation scheme.
  • Continued support for the Energy-Intensive Industries Compensation Scheme which offers some manufacturers quarterly payments to reduce the impact of the UK Emissions Trading Scheme (UK ETS) and the carbon price support mechanism (CPS).
  • Developing the Corporate Power Purchase Agreements (CPPA) market to secure more stable electricity prices.
  • A new Connections Accelerator Service to connect more demand projects to the grid.
  • Reforms to the electricity market to improve efficiency of the energy system with the move to renewables.

Advanced Manufacturing Sector Plan

The goal of the plan is to near double the annual business investment in the sector from £21 billion to £39 billion in 2035, ensuring that the UK is a global leader in Advanced Manufacturing.

Frontier manufacturing sectors will receive special support: automotive, batteries, aerospace, space, advanced materials, and agri-tech. The main interventions are:

  • A commitment to £4.8 billion in funding for the sector across the next five years.
  • A targeted Upskilling and Reskilling programme and a Recruitment and Workforce Transition programme.
  • £160 million in funding for the Advanced Manufacturing-focused Investment Zones across 10 years, and the development of AI Growth Zones.

Supply chains and foundational industries

The eight growth sectors depend on foundational sectors: electricity networks, ports, construction, steel, critical minerals, composites, materials and chemicals. If those inputs are unavailable or uncompetitive, the frontier industries they feed are affected too. That is why the strategy backs supply chains directly.

The main interventions are:

  • A new Supply Chain Centre, which will review these inputs and shape where public finance and sector grant funds are directed.
  • A Steel Strategy and an enhanced Critical Minerals Intelligence Centre, plus a new UK Export Finance loan guarantee scheme for domestic suppliers of critical minerals products.
  • £9.4 billion in capital budgets for carbon capture, usage and storage (CCUS), giving industries like steel, chemicals and materials a viable route to decarbonise.

This is also the logic behind the foundational category in BICS. A business that supplies inputs to a frontier manufacturer is treated as part of the same chain, whether or not it sits in a growth sector itself.

Tax and investment

The strategy's focus here is stability rather than a new tax relief for manufacturers. The Corporate Tax Roadmap, published at Autumn Budget 2024 and confirmed in the strategy, commits the government to the following for this Parliament:

  • Capping the corporation tax rate at 25%, and maintaining the Small Profits Rate and marginal relief at current rates and thresholds.
  • Keeping full expensing and the £1 million Annual Investment Allowance, so investment in plant and machinery continues to attract generous capital allowances.
  • Maintaining R&D tax relief rates and the Patent Box.

On the investment side, the strategy backs technology adoption directly. Made Smarter Adoption expands across England with up to £99 million from 2026 to help small and medium-sized manufacturers take up new technologies, and £40 million of initial funding goes to a new network of Robotics Adoption Hubs. The British Business Bank also receives £4 billion of additional capital for the eight growth sectors.

Removing barriers to business

Alongside direct financial support, the strategy sets out to remove the practical obstacles that slow businesses down. Two matter most: finding skilled people and dealing with regulation.

Skills

Businesses told the government that the skills system is not meeting their needs, and the strategy responds with a mix of training funding and reform. Most of these measures apply in England.

  • Over £100 million across three years for engineering skills, including new Technical Excellence Colleges to address engineering shortages.
  • Short courses funded through the Growth and Skills Levy in areas such as digital, AI and engineering, supporting sectors including Advanced Manufacturing from April 2026, alongside shorter and foundation apprenticeships.
  • A Lifelong Learning Entitlement from January 2027, so individuals can upskill and retrain across their working lives.

Regulation

The strategy commits to reducing the administrative costs of regulation for business by 25% by the end of this Parliament. The measures behind that target include:

  • Time-bound targets for regulators to process authorisations, with their performance published.
  • Consolidating regulators where it makes sense, to reduce the number of interactions a business needs on any single issue.
  • A new Treasury unit to challenge unnecessary regulation.
  • Working with the British Standards Institution to influence international standards, with the aim of reducing trade barriers.

Taken together, the aim is fewer separate regulators to deal with and more predictable timescales.

How does BICS support manufacturers?

The government has described BICS as a flagship measure of the Modern Industrial Strategy. It does this by exempting eligible manufacturers from the indirect costs of the Renewables Obligation, Feed-in Tariffs and the Capacity Market.

The scheme uses the strategy's structure to decide who benefits.

  • Frontier industries are manufacturing industries within the IS-8 growth sectors.
  • Foundational industries are manufacturing industries that supply inputs to the frontier industries.

In practice, that means a business making steel castings for an aerospace supplier could qualify as foundational, even though it isn't itself in a growth sector. The scheme recognises that frontier industries depend on their supply chains.

The government expects more than 10,000 manufacturers across Great Britain to be eligible. The great majority are small and micro businesses, which is a useful reminder that BICS isn't aimed only at large industrial groups.

To qualify for this exemption, you’ll need to be a registered company with an eligible SIC code, manufacturing an eligible product and using a minimum of 33,000 kWh of annual grid energy. To find out if you qualify, use Energy Relief Vault’s free checker.

How does the Supercharger support manufacturers?

The British Industry Supercharger gives specific manufacturers an exemption to a wider set of levies and policy costs, including the Renewables Obligation, Feed-in Tariffs, and Contracts for Difference. It also includes the Network Charging Compensation (NCC), which gives discounts on grid transmission and distribution fees.

This scheme supports very energy-intensive foundational industries, like steel, metals, chemicals, cement and other materials. These companies are limited in number but huge in size; around 550 companies are covered by the Supercharger, but they make up for 400,000 workers. Eligible companies need an Energy Intensive Industries (EII) certificate and to pass the electricity intensity threshold.

There is overlap between the Supercharger and BICS, so you need to be careful not to double dip and claim the reliefs on the same costs!

Key takeaways

The strategy sets the direction, but the benefit only reaches businesses that apply. If you're not sure whether your products fall within its scope, contact the Energy Relief Vault team to discuss your situation.