The EU’s proposed Industrial Accelerator Act marks a decisive shift towards economic security, low‑carbon manufacturing and tighter control of strategic industries. For UK manufacturers, the ripple effects will be immediate and structural, reshaping access to EU incentives, public procurement and investment routes. Businesses with EU‑facing supply chains must act now to understand their exposure and stay competitive.
Published: 17 March 2026
Authors: Ben Gardner
On 4 March 2026, the European Commission published its proposal for the Industrial Accelerator Act (IAA), a flagship initiative under the EU’s Clean Industrial Deal.
The IAA is designed to address structural vulnerabilities in EU industrial supply chains, including high energy costs and increased geopolitical risk. Its stated objective is to increase manufacturing’s share of EU GDP to 20 percent by 2035, up from 14.3 percent in 2024.
The proposal signals a significant shift in EU industrial policy, with a stronger focus on competitiveness, decarbonisation and economic security. While the UK sits outside the EU legislative framework, the IAA is likely to have material implications for UK manufacturers with EU‑facing operations, customers or supply chains.
Key measures
The draft legislation introduces several measures of potential relevance to UK businesses, including the following:
EU‑origin and low‑carbon requirements
The IAA proposes EU‑origin and low‑carbon content requirements for certain public procurement processes. Under the draft rules, contracting authorities and Member States would be required to purchase or financially support only products that meet minimum EU‑origin thresholds. The precise thresholds remain subject to negotiation.
These “made in Europe” requirements would also apply to the public procurement of electric vehicles. Once the IAA enters into force, public authorities offering consumer incentives for EVs would need to ensure that supported vehicles are substantially manufactured in Europe. In practice, this would require:
- final assembly of EVs within the EU
- at least 70 percent of non‑battery EV components, by value, to originate in the EU
- a significant proportion of the EV battery to be manufactured in the EU.
Tighter rules on foreign investment
The IAA proposes enhanced scrutiny of foreign direct investment exceeding €100 million where the investment is made into a designated emerging strategic industry and results in control of the target.
Designated sectors include battery technologies, pure electric vehicles, off‑vehicle charging, hybrid electric vehicles and fuel cell electric vehicles, solar photovoltaic technologies, and the extraction, processing and recycling of critical raw materials. Control is defined as ownership of at least 30 percent of share capital, voting rights or equivalent interests.
The regime captures prior investments into the same target and applies only to investors from countries that control more than 40 percent of global manufacturing capacity in the relevant strategic sector. Covered investments would be subject to additional review requirements aimed at ensuring tangible economic benefits within the EU, including local employment, technology transfer and strengthened supply chain resilience.
Non‑compliance could result in penalties of up to 5 percent of the investor group’s average daily aggregate revenues, in addition to any sanctions imposed by the relevant Member State. These rules would not apply to investors established in countries with which the EU has an economic partnership or free trade agreement.
Why this matters for UK businesses
The IAA is likely to have significant commercial implications for UK manufacturers and suppliers with EU customers, operations or supply chains. EU‑origin and low‑carbon requirements may restrict access to public procurement opportunities and public funding, while the proposed investment rules could increase regulatory scrutiny for UK‑based investors participating in EU industrial projects.
The automotive sector illustrates the potential impact. Under the proposals, many EU public support schemes, including fleet electrification initiatives and subsidies for smaller EVs, would apply only to vehicles assembled within the EU27. As a result, UK‑built vehicles and components could be excluded from EU incentives.
Corporate fleet support schemes account for approximately 50 to 60 percent of the EU new‑car market, while around 60 percent of UK‑manufactured cars are exported to the EU. Against that backdrop, the IAA risks placing UK‑manufactured vehicles at a systemic disadvantage relative to EU27‑origin vehicles, with potential consequences for competitiveness and sales volumes.
That said, uncertainty remains as to how these measures will apply to UK businesses in light of post‑Brexit trade arrangements, which were intended to reduce barriers to UK‑EU trade. In addition, UK‑EU discussions are ongoing regarding potential “trusted partner” status for UK businesses, which may influence how some of the requirements operate in practice.
What’s next?
The IAA remains at the proposal stage and has not yet been adopted. It will now proceed through the EU’s ordinary legislative procedure, requiring negotiation and approval by both the European Parliament and the Council of the EU. Further amendments should therefore be expected.
In the meantime, UK manufacturers should monitor legislative developments closely, assess their exposure to EU public procurement and funding regimes, and consider the potential impact on existing and future EU‑linked operations.