Manufacturing businesses were among the clear winners from Budget 2026. Faced with international competition, high energy costs and ongoing economic uncertainty, manufacturers have received a package aimed at lower electricity costs, investment incentives and support for innovation. As always, the devil is in the detail so we have picked out some things that might be relevant:
Cutting industrial energy costs
The headline announcement for manufacturers is the British Industrial Competitiveness Scheme (BICS).
From April 2027, more than 10,000 eligible energy-intensive manufacturing businesses will receive electricity bill reductions of between 20% and 25%, including a backdated payment for the 2026-27 period.
The government estimates this will bring UK industrial electricity costs closer to those faced by competitors elsewhere in Europe. For sectors such as steel, chemicals, ceramics, metals and advanced manufacturing, this could significantly improve competitiveness.
Supporting industrial growth and reindustrialisation
The Budget places “reindustrialisation” at the heart of the government’s growth agenda. Measures include:
• £20.4 billion of additional funding for the National Wealth Fund and British Business Bank.
• £1 billion of UKRI investment into innovation clusters.
• Strategic public procurement to support British industry.
• Faster regulatory processes for emerging technologies.
The government has explicitly identified advanced manufacturing, aerospace, defence, clean energy and industrial technology as priority sectors.
Major sector-specific announcements
Several manufacturing sectors receive targeted backing.
Aerospace
The government plans a 10-year £2.5 billion joint programme with Rolls-Royce to support development of next-generation gas turbine technologies for civil and defence aerospace. The programme is expected to support more than 3,000 jobs.
Chemicals
A new £350 million Critical Chemicals Resilience Fund will support strategically important chemical manufacturers and protect key supply chains.
Ceramics
A £120 million Ceramics Industry Support Scheme will fund energy efficiency and decarbonisation initiatives within the sector.
Life Sciences Manufacturing
The government announced support for major investments by Convatec, Vertex Pharmaceuticals and Kindeva, with Kindeva investing £200 million in respiratory medicines manufacturing in Loughborough. See more on this in our separate article.
Capital allowances changes
The Budget includes a notable change to capital allowances.
From April 2027:
• The main writing down allowance falls from 14% to 12%.
• The first-year allowance increases from 40% to 50%.
The intention is to encourage businesses to invest sooner by increasing upfront relief while reducing the value of relief available over time.
Manufacturers considering significant plant and machinery expenditure may therefore wish to review investment timings ahead of implementation.
The bottom line
Budget 2026 contains one of the most comprehensive manufacturing support packages seen in recent years. Lower energy costs, targeted sector support, increased innovation funding and a continued commitment to investment incentives all indicate a government seeking to place manufacturing at the centre of its long-term growth strategy.
This material is for informational purposes only and should not be relied upon as professional advice.
