British manufacturers warned at an industry event that the UK’s Carbon Border Adjustment Mechanism (CBAM), scheduled to start on 1 January 2027, could raise costs for companies using covered industrial inputs. They said imported finished goods could face no equivalent treatment, potentially affecting where companies locate factories, carry out manufacturing stages and source components.
The mechanism’s initial scope covers specified iron and steel, aluminium, cement, fertilisers and hydrogen products. Its coverage is based on legal commodity classifications and does not generally extend to every manufactured item containing steel or aluminium.
The potential imbalance affects British companies buying covered materials in the UK and competing with imports made in countries where equivalent finished goods fall outside the mechanism. A British component manufacturer, for example, could face higher input costs while a foreign supplier of a more complete manufactured product avoids equivalent UK CBAM treatment.
The warning concerns a possible cost imbalance; it does not establish that manufacturers have already relocated because of the mechanism. Nor has the UK government agreed to extend its charges to additional products: no change to the scope scheduled for January 2027 has been announced.
The European Union is separately negotiating an extension of its CBAM framework to selected downstream products. The proposed extension is partly intended to address the risk that emissions-intensive production could shift into goods that are not currently covered.
For Serbian metal fabricators and industrial exporters, the distinction between basic inputs and downstream goods may create different market-access conditions in the UK and the EU. The policy question for British manufacturers is whether carbon-border rules can protect domestic materials production without adding costs for customers that use those materials.
