Reducing the burden: The energy exemption many food manufacturers aren’t claiming

Food and drink manufacturing is the UK’s largest manufacturing sector, contributing £42 billion to the economy (source: Food and Drink Federation, March 2026). It’s also one of the most energy intensive. Refrigeration and cold storage can account for a significant portion of a site’s electricity consumption, and when you add things like process heating, steam generation, compressed air and packaging lines, energy often sits among the top three operating costs alongside labour and raw materials.

The FDF reported that production costs rose 4.4 per cent on average in 2025, and energy prices have been driven higher again by global supply chain disruption in 2026. These pressures directly affect what can already be small margins, so every (saved) pound counts.

Yet many food manufacturers are still not claiming exemptions available to them, to reduce the cost of their energy bills.

What exemptions are available?

Perhaps the most significant is the Climate Change Agreement, or CCA. This is a voluntary agreement between an energy-intensive business and the Environment Agency. In exchange for committing to energy efficiency targets, audited every two years, participating businesses pay a reduced rate of Climate Change Levy. From April 2026, a CCA reduces electricity CCL by 92 per cent and gas CCL by 89 per cent (source: HMRC).

To put that in practical terms: the main CCL rate on electricity from April 2026 is 0.801 pence per kWh. A CCA participant pays 0.064 pence per kWh, which is 8 per cent of the full rate. By way of illustration only, for a food manufacturing site consuming 10 million kWh of electricity a year and receiving the full 92 per cent electricity relief, that’s the difference between an annual CCL bill of around £80,000 and one of around £6,400. That would be a saving of more than £70,000 a year from a single exemption. This is a worked example on those assumptions, not a projection for any particular site. Actual relief depends on your consumption, fuel mix and continued compliance with the agreed efficiency targets, and your own figure will differ.

The government introduced these exemptions so that UK manufacturers are not put at a competitive disadvantage against overseas competitors that don’t face the same carbon costs. The UK has the second-highest industrial electricity prices of any IEA member country (source: Full Fact, October 2025). CCAs exist to keep UK production viable while the country transitions to a lower-carbon energy system. If you qualify, claiming the relief is exactly what the scheme was designed for, though eligibility is determined by the scheme administrator rather than by your supplier or adviser.

Why aren’t more food manufacturers claiming?

In my experience, CCA participation in the food and drink sector is lower than it should be because of a few common reasons.

Some businesses simply don’t know the exemptions exist, or assume they only apply to heavy industries like steel or cement. In fact, the food and drink sector has its own CCA umbrella agreement, and around 51 sectors are covered in total, including food processing, dairy, bakeries and cold storage operations. Any food manufacturer with significant refrigeration or process energy use may qualify.

Others have investigated the scheme but been put off by the application process. This involves working through your sector trade federation, completing PP10 or PP11 forms, and providing energy data to your supplier so the exemption can be applied to your bills. It does require some effort, but it’s far from the administrative ordeal many expect. Once in place, the exemption runs for the duration of the agreement and is applied automatically to your invoices. The new CCA scheme, confirmed in October 2024, runs from January 2026 to March 2033, so the commitment is long-term, as is the return.

A third barrier is where the decision falls between roles. Operations managers know the energy profile, but procurement or finance hold the supplier relationship. Technical directors understand which processes qualify, but nobody has been tasked with bringing it all together. If it’s not immediately clear whose job description the exemption sits under, it can be easily forgotten.

What about BICS, and why does it matter now?

Alongside CCAs, there’s a second mechanism; the British Industrial Competitiveness Scheme, or BICS, introduced under the Modern Industrial Strategy. This opens for registration on 1 October 2026 and is intended to reduce electricity costs for qualifying manufacturers. It should not be confused with the British Industry Supercharger, a separate and longer-standing scheme that relieves eligible energy-intensive businesses of the indirect costs of the Renewables Obligation, Feed-in Tariffs and Contracts for Difference, together with Capacity Market costs and network charging compensation. The two are complementary rather than interchangeable, and the same activity cannot be claimed under both. BICS is expected to apply a lower eligibility threshold than the existing Energy Intensive Industries (EII) route. The scheme’s value, eligibility thresholds and expected participant numbers should be taken from the Department for Business and Trade’s published guidance for applicants, as those are the figures decisions will be made on.

The registration window runs from 1 October to 30 November 2026, with eligibility decisions expected by the second week of January 2027 and relief applying from 2027. However, there’s no mid-year entry, so a business that misses the two-month window must wait until the following year. The precise date from which relief applies, and the treatment of successful first-round applicants, should be confirmed against the Department for Business and Trade’s guidance before either is relied on.

The FDF has been calling for more food and drink businesses to be included in BICS. Between CCAs and BICS, there are two distinct, legitimate mechanisms through which energy-intensive food manufacturers can reduce their regulated cost burden.

Where do I start?

For CCAs, the route in is through your sector trade federation. For food and drink manufacturers, this is typically the Food and Drink Federation, which administers the umbrella agreement. It can confirm whether your business qualifies based on the processes you operate and the energy intensity of those processes.

From there, the process involves submitting baseline energy data, agreeing to an efficiency target, and providing documentation to your supplier so the reduced rate can be applied.

For BICS, eligibility is assessed site by site, based on the proportion of electricity used for eligible manufacturing processes. If your business didn’t qualify under the previous EII scheme, it’s still worth checking, as BICS has been designed with a broader scope in mind.

For a food manufacturer spending six or seven figures a year on energy, claiming the exemptions you’re entitled to is one of the most direct ways to protect your margins without changing a single operational process. And with the BICS window opening in less than a month, the groundwork needs to start now.

In the next article in this series, I’ll look at a less visible but equally pressing challenge for the sector: energy resilience, and what it means when the power supply fails.

Akinola Oladimeji – Business Development Manager, Equity Energies

Projected savings, payback periods and operational benefits will vary depending on site demand profile, tariff structure, system design and future market conditions.