Budget 2025 impact on UK aluminium industry

Phil Black - PII Editor 16/12/2025

110 2 minutes read

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The 2025 Autumn Budget brings a mix of opportunities and hurdles for the UK metals sector, particularly for those in the aluminium manufacturing and processing arena. Here’s a quick rundown of the main updates and some suggested next steps.

Key Developments CBAM Indirect Emissions Deferred – The government has announced that indirect emissions, like those from electricity use, won’t be factored into the UK’s Carbon Border Adjustment Mechanism (CBAM) when it kicks in in 2027. Instead, these will be looked at starting in 2029 at the earliest. This delay is a crucial lifeline for energy-intensive industries, giving businesses that rely heavily on electricity some much-needed breathing room.
Technical Revisions to CBAM Framework – There have been some important tweaks to the CBAM, such as new calculations for free allowances based on sector-average emissions, acknowledgment of carbon costs already incurred under other CBAM systems, and exemptions for UK-made precursor goods in complex imports to prevent double carbon pricing. For aluminium refiners, processors, and manufacturers, these updates help minimize the risk of overcharging and redundancy within the CBAM framework.
Energy and Competitiveness Signals – Relief Delayed – The Budget reaffirms the Government’s intention to roll out the British Industrial Competitiveness Scheme (BICS), which is designed to lower electricity costs for manufacturers. However, support through BICS won’t kick in until 2027, leaving many companies to grapple with high energy costs in the meantime. It’s also worth noting that businesses involved in the Supercharger scheme won’t qualify for BICS.
Challenging Business Environment – Even with these supportive measures, the overall industrial climate remains tough. Industry groups like Make UK are sounding the alarm that ongoing cost pressures, particularly from rising energy and labor costs, could lead to further deindustrialization if urgent action isn’t taken.

ALFED is actively collaborating with government and industry partners through several key initiatives:

We're coordinating a sector-wide response to the BICS consultation on behalf of our members.
We're also building a solid evidence base through the UK Aluminium Alliance to support energy, scrap, and downstream processing as vital components of the UK’s industrial strategy.
Our team is closely monitoring the implementation of CBAM to ensure that the interests of the aluminium sector are well-represented in legislation and compliance guidance. The ALFED policy team will be attending the “One Month to Go Until EU CBAM: Final Readiness Summit” on November 28 to gather the latest insights on EU CBAM, embedded emissions data, and the emerging UK regime.

ALFED encourages its members to:

Review energy use and cost forecasts, especially in light of the delayed BICS support.
Prepare for CBAM compliance, keeping in mind that recent changes have eased some initial burdens, particularly concerning imports, precursor goods, and free allowances.
Share energy usage and scrap flow data with ALFED to help inform our policy responses and consultation submissions.

Industry Context

Make UK has highlighted that without addressing energy costs, many manufacturers face a precarious future, emphasizing the need for immediate, practical measures rather than just long-term promises.
The Cast Metals Federation points out that while the Industrial Strategy and Budget indicate support, the timeline for relief and investment is still too slow for many firms to stay competitive.

Conclusion: Immediate Engagement Required

While Budget 2025 includes some positive steps, the urgent challenge for many UK aluminium businesses is the current energy costs, not future schemes. ALFED will keep pressing the government for quicker action and stronger support. We urge our members to stay engaged, share data, and help shape the sector’s response to ensure that UK aluminium remains competitive and sustainable in the coming decade.

For more information or to discuss how this impacts your business, please reach out to nbloxsome@alfred.org.uk.