Budget 2025 has landed. While many had been hoping for a big announcement on business energy support, the result was underwhelming.
There was very little to help companies worried about rising energy costs. While the Chancellor, Rachel Reeves did say that “we are taking forward our commitment to slash electricity prices for thousands of manufacturing businesses”, the most important news actually came earlier in the week as part of the British Industrial Competitiveness Scheme (BICS), a new framework that’s aiming to bring down electricity costs for eligible manufacturers.
In this article, we highlight what did (and didn’t) happen in Budget 2025 in terms of business energy costs, while explaining what the new BICS scheme means for manufacturing businesses.
What didn’t happen in Budget 2025
No cut to VAT
There are always pre-budget rumours, but the mooted cut in VAT on energy bills didn’t happen. There had been talk of a reduction on the 20% VAT on non-domestic energy, but in the end the move proved to be too complex to implement and would have likely missed the mark anyway.
What did happen in Budget 2025
Review of new energy levies
There was a vague promise to “subject any additional costs, including new levies, to enhanced scrutiny under a new framework to ensure they are affordable, represent value for money and do not impose unnecessary costs on households and businesses.”
Network Charging Compensation (NCC) Scheme uplift
Budget 2025 pointed to the outcome of a recent consultation on the Network Charging Compensation (NCC) Scheme for energy intensive industries (EIIs). Plans have been announced to “increase the generosity of the British Industry Supercharger from April 2026”, by cutting electricity costs for around 550 energy intensive businesses through an uplift of the NCC Scheme from 60% to 90%.
Energy Profits Levy (EPL) to be replaced
The Energy Profits Levy (aka windfall tax) will continue until 2030 despite rumours that it may be rolled back and will eventually be replaced in 2030 (or earlier if the EPL’s price floor trigger is hit) by the permanent Oil and Gas Profits Mechanism (OGPM).
5p fuel duty cut staying
There’s some good news for businesses that run fleets as the 5p fuel duty cut is staying in place until the end of August 2026. After that, rates will gradually return to March 2022 levels by March 2027.
It was also announced that the planned increase in line with inflation for 2026-27 has been cancelled.
In case you missed it: Energy brokers are to be regulated by Ofgem
Separate from Budget 2025, it was recently announced that Ofgem will start to regulate third-party energy brokers.
For years, businesses (especially SMEs) have complained about opaque commission structures and dodgy practices among Third-Party Intermediaries (TPIs). Now, Ofgem will introduce formal regulation, including power to:
- set principles and rules
- monitor and investigate TPIs
- order redress where appropriate
- require TPI authorisation before operating in the market.
While this won’t cut business energy bills overnight, it’s a huge step forward for the industry and could lead to real savings.
The real big news: British Industrial Competitiveness Scheme (BICS)
The most important development for business energy didn’t come in Budget 2025 at all. It came earlier this week with the launch of the British Industrial Competitiveness Scheme (BICS) consultation.
This is set to be a major package aimed at energy-intensive industries, which are largely manufacturers from within the UK Government’s IS-8, which have been identified as key to growth as part of the Industrial Strategy, or from the foundational industries that supply the IS-8.
Those who are eligible will be given long-term certainty on exemptions from policy costs such as the Renewables Obligation (RO), Feed-in Tariffs (FIT) and the Capacity Market (CM). The goal is to support the industries with a high growth potential, keeping them competitive while moving towards net zero, in an effort to also boost the UK economy.
BICS promises to offer the kind of structural support businesses have long been asking for, helping to bring clarity on costs and investment for the next decade.
If you’re energy-intensive, we strongly recommend that you take part in the BICS consultation. The government is actively seeking to speak to manufacturing businesses, along with other relevant stakeholders, and the closing date is 19 January 2026.
How Leyton can help
If you were hoping for instant relief on your energy bills, Budget 2025 will likely have been a disappointment. But there are clear ways to implement meaningful cost reductions (especially with the announced British Industrial Competitiveness Scheme).
At Leyton UK, our energy tax relief experts are ideally placed to check if your business can receive savings from government incentives. We can also help your business identify ways of reducing emissions as well as costs through carbon emission reporting.
Get in touch to find out more.
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