What “Made in Europe” really means for the UK

When the European Commission published its Industrial Accelerator Act (IAA) — better known as the “Made in Europe” draft — on 4 March 2026, the headlines focused on Brussels’ ambition to take on China and rival the US Inflation Reduction Act.

At its heart, the IAA is a roadmap to transform the EU into a self-sufficient industrial powerhouse, mainly targeting three strategic sectors: energy-intensive industries (steel, aluminium, cement and chemicals), net-zero technologies (wind, solar, batteries and hydrogen), and automotive. The headline target is ambitious: to have manufacturing account for 20% of EU GDP by 2035. Despite being just a draft, it has already generated more lobbying, corporate contingency planning and diplomatic anxiety than most EU legislation that has actually passed into law.

The act’s mechanism is straightforward: where public money is involved — procurement contracts, subsidies, state aid — a minimum share of the goods must be made in Europe. For electric vehicles (EVs), that threshold is 70% of components. For steel, aluminium, cement and clean technologies, sector-specific quotas apply. Countries outside the EU are, by default, excluded. But the definition of “Europe” turns out to be more flexible than it first appears, and understanding that flexibility is now the central challenge for British policymakers.

Who actually counts as “European”?

The IAA does not limit “Made in Europe” to EU member states. It extends eligibility to a broader group of “trusted partners” via two legal routes: existing EU free trade agreements (FTAs), and membership of the WTO’s Government Procurement Agreement (GPA). Critically, GPA requires reciprocity — a country must open its own public procurement market to EU firms on equivalent terms to qualify. Norway, Iceland and Liechtenstein, already inside the Single Market through the EEA, are included by default. The UK sits in the next tier — GPA membership establishes the legal basis for inclusion, but it does not guarantee it automatically. The UK is also eligible as it has an existing FTA with the EU – the UK-EU Trade and Cooperation Agreement. However, the Commission must still make an active decision on the UK's procurement market is sufficiently open on reciprocal terms, meaning inclusion remains a subjective decision as much as a legal one. The US, though a full GPA member, effectively restricts EU firms from its public contracts, giving Brussels grounds to argue reciprocity is not being met and therefore excluding American manufacturers from the scheme.

Even formal inclusion, however, is not the end of the story. The IAA’s scope will be refined through subsequent technical regulations and bureaucratic decisions, not primary legislation. That matters enormously: it means exceptions, carve-outs and eligibility criteria can be redrawn by officials. A single quietly changed technical definition could exclude UK-made components from specific product categories while leaving the headline “trusted partner” label intact. The lobbying to do exactly that is already under way. France’s automotive parts association CLIFA wants “Made in Europe” restricted to the 27 EU member states only. However, France’s main business federation MEDEF takes the opposite position, arguing that French manufacturers themselves rely on non-EU supply chains. The European auto parts association CLEPA is caught in between, representing both sides of that argument at once. Germany exemplifies the wider tension: Berlin wants to protect its automotive industry but fears that strict content rules could invite retaliatory measures hitting German machinery and chemical exports globally, which is why it is pushing to keep the act within WTO rules.

The formula that decides everything

Nowhere is this tension more consequential than in EVs, where the content calculation methodology will determine whether billions of pounds of UK automotive exports qualify. The current draft sets a 70% threshold for EU-origin components excluding the battery — but the formula is not set on how to calculate this threshold. Consider the difference between two hypothetical scenarios:

1. Component count: at least 70% of an EV’s parts, excluding the battery, must originate from the EU or a trusted partner.
2. Total value including battery: at least 60% of an EV’s total value must come from the EU or trusted partners, with 40% of battery cells manufactured within EU member states.

Under Version B, a car with Korean battery cells, UK-assembled bodywork and a French engine could fail the threshold entirely — not because anything was sourced outside a trusted partner, but simply because the battery pulls the EU-origin value share below the required level. The question of which formula ends up in law may matter as much to UK carmakers as the question of whether the UK is included at all. Renault has not waited to find out: it has already decided to concentrate its entire EV production, including battery assembly, in three northern French towns. Other manufacturers are watching and drawing their own conclusions, without waiting for the draft legislation to become law.

The sectors where the stakes are highest

Figure 1 shows the estimated breakdown of UK goods exports to the EU in 2024 by commodity category. Blue bars highlight sectors with direct IAA exposure and grey bars indicate lower IAA exposure, meaning goods for which the act explicitly sets EU-origin or low-carbon content thresholds for public procurement and subsidy eligibility. Machinery and transport equipment is identified as high-risk, because it includes cars and automotive components, which are directly subject to the 70% EU-origin rule for EVs. Chemicals is another high-risk sector as industrial chemicals and materials fall within the act’s strategic-sector scope, even though pharmaceuticals within that category face lower direct risk.