What does the EU’s Industrial Accelerator Act proposal mean for UK businesses?

The recently published Industrial Accelerator Act (IAA) proposal forms a central pillar of the EU’s Clean Industrial Deal, the EU’s industrial strategy for decarbonisation and competitiveness. The proposal reflects a broader shift in EU economic policy towards strengthening industrial capacity within Europe while advancing the green transition, achieved through incentives rather than regulation (for an update on the EU Sustainability Omnibus please see here).

The Act focuses on sectors that combine two key characteristics:

• High energy consumption and greenhouse-gas emissions, and
• Critical importance for European supply chains and the manufacturing sectors, including steel, cement, chemicals, aluminium and other basic industrial materials.

The proposal aims to reinforce the industrial base from 15-16% of EU GDP to 20%.

The initiative is heavily influenced by the EU’s concerns regarding geopolitical developments, including that China has become a dominant global producer of low-carbon technologies, and that the United States has adopted large industrial subsidy programmes, notably through the Inflation Reduction Act, which has, in addition to the highly complex, burdensome, and everchanging regulatory landscape in the EU, contributed to further investment away from the Internal Market.

Therefore, the EU is increasingly pursuing policies aimed at strategic autonomy, supply-chain resilience, and industrial competitiveness via incentivisation to manufacture in the Internal Market, rather than heavy regulation of the private sector.

Core policy tools of the IAA

The proposal relies on four main policy instruments:

1. Public procurement procedures
2. Funding schemes/subsidy programmes
3. Foreign investments
4. Acceleration of permission procedures

1. Public procurement as a market tool for the production of low-carbon products

Public procurement represents roughly 14–15% of EU GDP. The IAA uses procurement as a strategic instrument to create “lead markets” for certain products.

The IAA aims to stable demand signals from the public sector that encourage (EU-based) companies to invest in clean production technologies.

Under the proposed IAA, the EU therefore plans to introduce minimum “green content”, partially combined with Union origin, requirements in certain public procurement projects. For example, at least 25% of steel intended to be used in public buildings, infrastructure and vehicles must be low carbon.

For concrete and cement-based materials, at least 5% of those materials intended for use in buildings and infrastructure for civil purposes must be both low-carbon and have Union origin, while for aluminium, at least 25% of those materials intended for use in buildings, infrastructure and motor vehicles for civil purposes must meet the same combined low-carbon and Union origin requirement.

In addition, even more stringent procurement criteria apply to the electric vehicle market and most of its related components.

In practice, this means that environmental criteria is increasingly being combined with EU production requirements, which could favour suppliers with manufacturing (or in some cases assembly) operations inside the EU.

Treatment of UK companies and procurement access

Content from countries that have:

• Free trade agreements with the EU
• Customs unions with the EU (Turkey being the only notable country)
• Membership in the WTO Government Procurement Agreement (GPA)

may be treated as equivalent to Union origin.

In principle, UK companies are entitled to equal treatment in related procurement procedures, due to the Trade and Cooperation Agreement (TCA), and it also acceded the GPA in its own right in the wake of Brexit.

There are additional territorial production requirements for new electric vehicles. as these must be assembled within the EU, and a significant share of key components must originate in the EU.

As a result, even where UK-origin components may be treated as equivalent to Union origin, a vehicle manufactured or assembled in the UK would normally not satisfy the assembly requirement, and could fail to qualify under these procurement rules.

In addition, the Commission retains the politically and strategically important power to exclude specific countries through delegated acts if:

• Reciprocity in relation to public procurement access is lacking (which is currently the case e.g. for China, which is not part of the GPA),
• Supply-chain risks arise, or
• Trade-agreement exceptions apply.

In practice, this means that the EU could revisit the treatment of inputs from specific countries (including the UK) if it concludes that dependencies in strategic industrial supply chains are emerging, or if reciprocal access to procurement markets is considered insufficient.

For many UK companies supplying materials, components or technologies into EU projects, the risk is therefore less one of immediate exclusion and more one of future policy shifts.

Companies integrated into the EU regulatory ecosystem (ETS, product standards, reporting frameworks etc.) are structurally may, however, be better positioned to demonstrate compliance in practice.

2. Union origin and low-carbon requirements in certain funding schemes/subsidy programmes

Under the proposal, Member States must design certain public funding schemes by applying low-carbon and, in some cases, Union origin criteria.

Certain projects receiving public financial support such as subsidies for building construction or renovation, infrastructure projects, or vehicle purchases and leasing schemes may only qualify if the materials used meet the above-mentioned minimum thresholds for public procurements.

As a result, at least 25% of steel used in a publicly supported project for the above projects must be low-carbon, while 5% of concrete and cement-based materials and 25% of aluminium must be both low-carbon and of Union origin.

Also, and as per the above, even more stringent criteria apply to the electric vehicle market and most of its related components.

Unless certain limited exceptions apply, Member States must apply these requirements to at least 45% of the national budget allocated to relevant support schemes for industrial materials, and to 100% of the budget for support schemes relating to clean vehicles.

The legislation allows the Commission to exclude certain third countries under the same conditions as in relation to public procurement procedures.

Access to public funding by UK companies

For UK companies, the implications are similar to those in public procurement. UK-based suppliers may still participate in many projects benefiting from public funding, as many UK-origin products are treated as equivalent to Union origin under international (procurement) agreements, however, this policy might change in the future and provision of the related evidence may be de facto easier for companies that are embedded in the EU regulatory system.

3. Conditions on foreign investment in strategic sectors

The proposal allows the EU to impose conditions on large foreign investments in strategic industrial sectors, including batteries and energy storage, electric vehicles and components, solar technologies and critical raw materials.

Foreign direct investments above approximately €100 million in these sectors may be subject to additional scrutiny and conditions, in addition to the EU’s Foreign Direct Investment (FDI) regime (the equivalent of the UK’s National Security and Investment (NSIA) regime).

4. Accelerated permitting for industrial decarbonisation projects

Another major barrier to industrial transformation in Europe is the length and complexity of permitting procedures for large industrial projects.

These include investments such as hydrogen-based steel plants, carbon-capture installations in cement production, electrified chemical manufacturing and battery gigafactories.

The IAA introduces measures to simplify administrative procedures, including single national “one-stop-shop” contact points for project applications, coordinated permitting procedures, and faster processing for strategic decarbonisation projects.

To ensure simplification it also allows Member States to designate Industrial Manufacturing Acceleration Areas.

Strategic significance

Together with other EU instruments such as the Net-Zero Industry Act (NZIA), the IAA proposal reflects a broader shift in EU policy towards industrial resilience and strategic autonomy.

Rather than relying (solely) on regulatory standards, the EU is increasingly using tools such as public procurement policy and public subsidy schemes aimed at ensuring that the technologies required for the green transition are developed and produced within Europe.

UK companies with European operations or supply-chain exposure should carefully follow these policy developments and be prepared to demonstrate origin, traceability and low-carbon performance in detail. If you have questions or concerns about the IAA proposal, please contact EU & Competition partner Alexandra von Westernhagen.