From January 2027, the United Kingdom’s Border Carbon Adjustment Mechanism (BCAM) will impose a carbon tax on imports of high-emission goods such as steel, cement, aluminium, fertilisers, and electricity coming from countries without equivalent carbon pricing systems. The levy will be calculated based on the embedded carbon content of the imported product, with initial rates expected to range between £50 and £100 per tonne of carbon dioxide equivalent (CO₂e).
For a small United Kingdom manufacturer importing £200,000 worth of steel components each year from Turkey or India, this could add £15,000 to £30,000 in extra costs annually – costs that cannot be fully passed on to customers in highly competitive markets.
The British Chambers of Commerce (BCC) Quarterly Economic Survey for Q4 2025 shows that 58 % of small and medium-sized enterprises (SMEs) in manufacturing and construction already identify rising import costs as one of their top three concerns, up from 42 % before the BCAM announcement. Many small fabricators, builders’ merchants, and engineering firms rely on non-European Union suppliers because they offer better price and availability. The new tax will squeeze profit margins, force price increases, or compel businesses to switch to more expensive domestic alternatives – if those alternatives are even available.
Large corporations can absorb or hedge against the additional cost through long-term contracts or lobbying for exemptions. Small and medium-sized enterprises – the ones that employ 60 % of the private-sector workforce – cannot. When they lose competitiveness, jobs disappear, supply chains weaken, and local economies suffer.
The solution is targeted and affordable:
- Create a £300 million Small and Medium-sized Enterprise Import Relief Fund, administered by the British Business Bank.
- Offer grants of up to £25,000 per SME to cover BCAM levies during the first three years (2027–2029).
- Eligibility: businesses with turnover under £10 million that import carbon-intensive goods from non-Emissions Trading Scheme 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, Value Added Tax (VAT), and corporation tax (Office for Budget Responsibility modelling of similar trade support schemes).
This is not protectionism; it is levelling the playing field. The European Union’s Carbon Border Adjustment Mechanism (CBAM) already offers transitional relief and exemptions for small importers. The United States has tariff rebates for small and medium-sized enterprises. 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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