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18 January 2023

Britishvolt, a death flag for the UK battery industry?

The majority of Britishvolt’s 300 staff have been informed of their immediate redundancy as of Tuesday 17th of January, following the collapse of an internal buyout that was pursued over the weekend.

We’ve been concerned about Britishvolt for a good while now, even taking the occasional drive past the development site last February and September to see what exactly was going on – or more accurately – what wasn’t. The site looked broadly similar even after a 7-month gap, which at the time was explained to us as the result of delays. Evidently it seems to have been about a bit more than that.

What should have tipped us off that something company-ending was about to happen was Tata Group’s – the owners of Jaguar Land Rover and Tata Motors – announcement last week that it would look to produce battery cells in Europe and India by investing in its own facilities, not exactly showing much faith in the outcome of negotiations despite its previous investments and commitments to purchasing batteries from Britishvolt for its Jaguar production facilities.

Britishvolt was meant to be the crown jewel of British battery manufacturing, it had the best site in the country, deigned as one of the best in the world economically, and yet it still failed before making much of a dent on its world-leading manufacturing site.

The project was heralded as an opportunity for Leveling Up within the country, with support and publicity given by ex-prime minister Boris Johnson as part of his 2019 leadership campaign, which heavily relied on promises of new industry and working opportunities in less wealthy constituencies. Something the conservatives have historically failed in during their previous 9 years in office.

The government had promised Britishvolt £100 million towards the project that was set to be distributed to the company when it hit certain milestones. Last October, Britishvolt made a request of the government to draw down £30 million of this investment early, to ensure it could meet its expenses. The government then declined the request citing the terms of the contract. While the government will get a lot of stick for this, as it seems like denying Britishvolt this emergency lifeline was the beginning of the end, this was the financially prudent decision at the time. Governments can’t just give forward payments to companies with no revenue stream as it would be opening itself up to serious liabilities in the case of foreclosure. If the government had given it this money, and the company collapsed in March instead of January, more would have been lost. Britishvolt then made two further requests for £11.5 million and then just £3 million in order to stave off administration.

While the company had a couple of major supporters, namely Tata Motors – which previously outlined its desire for the Jaguar brand to be fully-electric by 2025 – and a supply agreement with mining giant Glencore, it never found any customers with serious battery requirements. Tata’s UK-based manufacturing is for low-volume luxury vehicles, neither Jaguar nor Land Rover produce large enough volumes in the UK to sustain a gigafactory by themselves. Britishvolt just didn’t have the demand to justify its plans.

This leads to another problem facing the UK, where is this demand going? A couple months ago BMW Group announced that it would be moving the manufacturing of its electric Minis to China by the end of 2023, saying “Oxford is not geared up for electric vehicles. It will need renovation and investment.” Quite clearly implying that it just doesn’t make business sense to manufacture EVs in the UK. This is the issue Britishvolt ran into, the UK isn’t an attractive place to invest for a number of reasons. Even Jaguar Land Rover – a very proudly British brand – expanded into Eastern Europe in the mid-2010s, seeing that the cost advantages were significant relative to operating solely within the UK.

The UK simply can’t be compared with China when it comes to manufacturing costs, supply chain maturity, ease of doing business, or the level of government support and favorable policy conditions. It definitely can’t be compared with the US since the passing of the Inflation Reduction Act, the policy support is non-existent by comparison and the UK has seemingly no interest in protectionism for the automotive industry. It’s even struggling to compete with Europe despite war on the continent. The lack of consistent policy direction and recent political instability means there just isn’t the confidence in the UK that there once was.

So what reasons are there to invest in UK-based battery or EV manufacturing? Honestly, even through the rose-tinted glasses of a Briton it’s a tough sell, the Blyth site was unique in its suitability, great port access with an ample supply of locally produced renewable energy, and even that wasn’t enough to keep Britishvolt afloat because the demand simply wasn’t there from major OEMs.

The Blyth site remains one of the best in the world, and will likely be used for manufacturing sometime in the future, hopefully by a company less fueled by optimism than Britishvolt, but if even this world-class site struggled to attract customers, what does that mean for the rest of the country where conditions aren’t as good and there’s a similarly lacking appetite for battery manufacturing?