From January 2027, the UK’s Border Carbon Adjustment Mechanism (BCAM) will impose a carbon tax on imports of high-emission goods (steel, cement, aluminium, fertilisers, electricity) from countries without equivalent carbon pricing. The levy will be calculated on the embedded carbon content, with rates expected to start at £50–£100 per tonne of CO₂e. For a small UK manufacturer importing £200,000 of steel components annually from Turkey or India, this could add £15,000–£30,000 in extra costs per year – costs that cannot be passed on fully in competitive markets.
The British Chambers of Commerce Q4 2025 survey shows that 58 % of SMEs in manufacturing and construction already report rising import costs as a top-three concern, up from 42 % before the BCAM announcement. Many small fabricators, builders’ merchants, and engineering firms rely on non-EU suppliers for price and availability. The new tax will squeeze margins, force price rises, or push companies to source more expensive domestic alternatives – if they exist.
Large corporations can absorb the hit through hedging, long-term contracts, or lobbying for exemptions. SMEs – the ones that employ 60 % of the private-sector workforce – cannot. When they lose competitiveness, jobs disappear and supply chains weaken.
The solution is targeted and affordable:
- Create a £300 million SME Import Relief Fund, administered by the British Business Bank.
- Offer grants of up to £25,000 per SME to cover BCAM levies in the first three years (2027–2029).
- Eligibility: businesses with turnover under £10 million importing carbon-intensive goods from non-ETS countries.
- Funds disbursed quarterly against proof of levy paid.
- Estimated cost: £300 million over three years – less than 0.3 % of the £100 billion+ annual customs and excise revenue, and fully recouped through preserved jobs, VAT, and corporation tax (OBR modelling of similar trade support schemes).
This is not protectionism; it is levelling the playing field. The EU’s CBAM offers transitional relief and exemptions for small importers. The US has tariff rebates for SMEs. Britain should do the same – protect our manufacturers while the rest of the world catches up on carbon pricing.
Stop letting a well-meaning climate policy become a hidden tax on small businesses. Give them the breathing space to adapt and compete.
The 1832 Club is fighting for these changes. The more members we have, the louder our voice in Westminster.
Join today from just £5/month or £40/year and help to support pro-SME candidates.
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