Britishvolt collapse should spark debate on whether it was actually needed

Published

2 years ago

January 17, 2023

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The collapse into administration of Britishvolt will rekindle concerns for the long-term future of the British car-making industry.

The sector is under extreme pressure to pivot from making cars powered by the internal combustion engine to electric vehicles (EVs). To that end the UK government has decreed that, from 2030, no new petrol or diesel cars will be sold in the UK.

Central to that transition to EVs is the need for a number of new ‘gigafactories’ – plants that could produce electric car batteries at scale – and the Johnson government had targeted at least seven or eight of them.

The assumption among industry analysts is that, due to the weight of EV batteries and the expense of transporting them, they need to be located near to the carmakers. Hence the need to build them in the UK.

That need for local sourcing is amplified by ‘rules of origin’ provisions in the UK’s Brexit deal with the EU which require that 70% of a battery must be built in either the UK or the EU for the EV it powers to be sold tariff-free in the bloc. Four in every five British-built cars are exported and just over half of them are sold to countries in the EU.

It is why Britishvolt was promised £100m from the Automotive Transformation Fund, the £850m taxpayer-backed programme aimed at supporting the electrification of Britain’s automotive supply chain.

So the failure of Britishvolt will be seen as a severe setback to the country’s ambitions for EVs. It casts doubt over what is one of only two gigafactories in the UK towards which meaningful progress was being made, the other being built at Sunderland by the Chinese battery maker Envision, which is partnering Nissan locally.

Yet some will argue it is premature to extrapolate Britishvolt’s woes to wider prospects for gigafactories in the UK.

Britishvolt has been seemingly cursed from the off.

Its co-founder, Lars Carlstrom, left the company nearly three years ago after it emerged he had been convicted for tax offenses in his native Sweden. There was then confusion when the company announced its factory would not be in Bridgend in south Wales, as originally intended, but at Cambois near Blyth, in Northumberland, where it had been offered more attractive financial incentives to locate.

In the meantime, the company continued to rack up costs, with the monthly salary bill for its 300 employees reported to be £3m.

Britishvolt then pushed back the planned start date for production to 2025, blaming Russia’s invasion of Ukraine for pushing up costs, while a request for government support was made. It later emerged that management had put the company on what was described as ‘life support’ in July.

Then, in August last year, Mr Carlstrom’s co-founder, Orral Nadjari, unexpectedly resigned.

The Guardian newspaper subsequently reported details of his extravagant spending, revealing that the company had leased a seven bedroom £2.8m mansion with a swimming pool and jacuzzi for executives, as well as hiring a Dubai-based fitness instructor to conduct yoga classes for staff remotely.

Lack of firm supply deals with carmakers

Graham Hoare, the respected former head of Ford of Britain, was hired in his place as an interim chief executive and, in November, the company secured an emergency lifeline from Glencore, the commodities trading and mining giant, which was one of its shareholders.

But at the heart of its problems was that it had never signed firm supply deals with carmakers sufficient to guarantee future revenues of the kind that potential investors would have wanted to see.

All it had were preliminary agreements with two luxury carmakers, Aston Martin and Lotus, to design batteries for their EVs.

Last week, the company said it was in talks to sell a majority stake in itself to a consortium of investors in order to secure its future, but those came to nothing.

Today brought the news, which had seemed increasingly inevitable, of administration.

That need not be the end of the story.

Britishvolt’s main asset, the site at Cambois, is well-located close to a deep-water port and enjoys both good rail links and access to clean energy from Norway. It is highly likely to attract potential buyers.

India’s Tata Motors, the owner of Jaguar Land Rover, has been suggested as a possible buyer although it is hard to see why it would want to own a site in Blyth when a site in Coventry, much closer to the bulk of its manufacturing facilities elsewhere in the West Midlands, remains possible for development.

The bigger questions and concerns

Perhaps the bigger question – and concern – is how many car manufacturers will be in need of British-made EV batteries come the end of the decade.

Honda has already closed its plant at Swindon in Wiltshire while Stellantis, the Fiat, Peugeot and Citroen combine, is ending volume car production at Ellesmere Port in Cheshire and converting production there to electric vans and cars whose battery cells will be sourced on mainland Europe.

Mini’s owner, BMW, has confirmed the next generation of the model’s electric version will be built not at Cowley in Oxfordshire but in China. And it is not yet clear from where the luxury British carmakers Rolls-Royce and Bentley, respectively owned by BMW and Volkswagen, intend to source their batteries as they switch to EV production. Nor are Toyota’s intentions clear for its site at Burnaston in Derbyshire.

The biggest question of all concerns Jaguar Land Rover which, it seems, is likely to be relying on European production for at least some of the batteries powering its UK-built vehicles.

So perhaps the bigger worry is not the lack of gigafactories but whether they will actually be needed amid declining output from British-based volume car producers.

Business

Vodafone and Three merger could get green light, says UK’s competition watchdog

Published

4 hours ago

November 5, 2024

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Vodafone and Three merger could get green light, says UK's competition watchdog

A £15bn merger between two of the UK’s biggest mobile networks could get the green light – if they stick to their commitments to invest in the country’s infrastructure, the competition watchdog has said.

The Competition and Markets Authority (CMA) said the merger of Vodafone and Three had “the potential to be pro-competitive for the UK mobile sector”.

Announced last year, the proposed £15bn merger would bring 27 million customers together under a single provider.

The watchdog previously warned that tens of millions of mobile phone users could end up paying more if the merger went ahead.

However, the two groups recently set out plans to protect consumer pricing and boost network investment.

The CMA has now laid out a list of “remedies” required for the deal to go-ahead.

They include the networks committing to freezing certain tariffs and data plans for at least three years to protect customers from short-term price rises in the early years of the network plan.

Stuart McIntosh, chair of the inquiry group leading the investigation, said on Tuesday: “We believe this deal has the potential to be pro-competitive for the UK mobile sector if our concerns are addressed.

“Our provisional view is that binding commitments combined with short-term protections for consumers and wholesale providers would address our concerns while preserving the benefits of this merger.

“A legally binding network commitment would boost competition in the longer term and the additional measures would protect consumers and wholesale customers while the network upgrades are being rolled out.”

Today’s announcement is provisional, with a final decision due before 7 December. The inquiry group is inviting feedback on today’s announcement by 5pm on 12 November.

The CMA also published a list of potential solutions – which it called remedies – to issues it identified with the merger.

If the networks want the merger to go ahead, the watchdog requires Vodafone and Three to:

• Deliver a joint network plan to set out network upgrades and improvements over eight years;

• Commit to keeping certain existing tariff costs and data plans for at least three years to protect customers from price hikes;

• Commit to pre-agreed prices and contract terms so Mobile Virtual Network Operators (MVNOs) – mobile providers that do not own the networks they operate on – can obtain competitive wholesale deals.

Vodafone and Three are two of the biggest mobile firms in the UK, and their networks support a number of MVNOs including Asda Mobile, Lebara, Voxi, and Smarty.

Responding to the watchdog’s announcement, a spokesperson for Vodafone on behalf of the merger said: “The merger will be a catalyst for positive change.

“It will bring significant benefits to businesses and consumers throughout the UK, and it will bring advanced 5G to every school and hospital across the country.

“The merger is also closely aligned with the government’s mission to drive growth and to encourage more private investment in the UK.”

Earlier this year, Three’s chief executive hit out at the UK’s “abysmal” 5G speeds and availability as he urged regulators to approve the company’s merger with Vodafone.

Robert Finnegan noted his firm’s “cash flows have been negative since 2020 and our costs have almost doubled in five years, meaning investment in [the] network is unsustainable”.

“UK mobile networks rank an abysmal 22nd out of 25 in Europe on 5G speeds and availability, with the dysfunctional structure of the market denying us the ability to invest sustainably to fix this situation,” he added.

Business

Bosses rail at business secretary over ‘avalanche of costs’

Published

18 hours ago

November 4, 2024

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Bosses rail at business secretary over 'avalanche of costs'

Business leaders expressed frustration with ministers on Monday amid a growing budget backlash that bosses said would trigger an “avalanche of costs” and leave them with no choice but to slash investment and increase prices.

Sky News has learnt that bosses of large retail and hospitality companies and trade associations told Jonathan Reynolds, the business secretary, that last week’s budget risked damaging consumer confidence and exacerbating challenges facing the UK economy.

Among the dozens of companies represented on the call are said to have been Burger King UK, Fuller Smith & Turner, Greene King, Kingfisher and the supermarket chain Morrisons.

Mr Reynolds is said to have acknowledged that Rachel Reeves‘s inaugural fiscal statement had “asked a lot” of British business, with James Murray, the financial secretary to the Treasury, understood to have described it as “a once-in-a-generation budget”, according to several people briefed on the call.

One insider said that Nick Mackenzie, the chief executive of Greene King, had highlighted that the increase in employers’ national insurance (NI) contributions would cause “a £20m shock” to the company, while Fullers is understood to have warned that it would be forced to halve annual investment from £60m to £30m as a result of increased cost pressures.

Rami Baitieh, the Morrisons chief executive, told Mr Reynolds that the budget had exacerbated “an avalanche of costs” for businesses next year, and asked what the government could do to mitigate them.

Sources added that the CBI, the employers’ group, said its impact would be “severe”, while the British Beer & Pub Association added that there was now a disincentive to invest and flagged “a tsunami” of higher costs.

The range of comments on the call with ministers underlines the scale of discontent in the private sector about Labour’s first budget for nearly 15 years.

Only a small number of interventions during the discussion are said to have been in support of measures announced last week, with the Federation of Small Businesses understood to have praised the doubling of the employment allowance, which would see many of the smallest employers having their NI bills cut by £2,000.

The Department for Business and Trade has been contacted for comment, while none of the companies contacted by Sky News would comment.

Business

Retail giants face food price hikes dilemma after budget

Published

23 hours ago

November 4, 2024

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Retail giants face food price hikes dilemma after budget

Two of Britain’s biggest food retailers will this week face pressure to publicly disclose whether they expect a fresh spike in prices next year as the industry grapples with huge tax hikes imposed in last week’s budget.

Sky News understands that Marks & Spencer (M&S), which will unveil half-year earnings on Wednesday, and J Sainsbury, which reports interim results the following day, are collectively facing an additional bill of close to £200m as a result of changes to employers’ national insurance contributions (NICs) announced by Rachel Reeves, the chancellor.

Industry sources said the pressure on pricing would be “intense” given the thin margins on which the big supermarkets already operate.

“Food price increases from next April are inevitable,” said one.

The warning comes a day after Ms Reeves told Sky News that “businesses will now have to make a choice, whether they will absorb that through efficiency and productivity gains, whether it will be through lower profits or perhaps through lower wage growth”.

Pointedly, she did not highlight the prospect of higher prices at the tills, with some retailers now weighing whether to explicitly blame the government for impending price increases – a move which will trigger renewed inflation in the UK economy.

The grocery industry is expected to be among the hardest-hit by the changes to employer NICs, particularly after the chancellor slashed the threshold at which businesses become liable for it to just £5,000.

Tens of thousands of people employed part-time in the sector earn between that sum and the current threshold of £9,100.

The first major retailer to report financial results since the budget will be Primark’s parent, Associated British Foods (ABF), on Tuesday.

Insiders downplayed the risks of price hikes from Primark given its track record of absorbing inflationary pressures without passing them on to consumers.

ABF’s additional employer NICs bill is expected to be in the region of £25m, according to one analyst.

Overall, the retail sector could end up paying billions of pounds of additional tax given the scale of its workforce.

Ms Reeves has vowed to raise £25bn extra annually from the changes to employer NICs.

In addition to that, the rise in the national living wage will add a further burden to the financial pressures facing the retail industry.

Prior to the budget, Stuart Machin, the M&S chief executive, urged the chancellor not to increase taxes on it, calling them “a short-term, easy fix”.

“When I hear about plans to increase national insurance, a tax with no link to profit which hits bigger employers like us and our smaller suppliers, I’m concerned.

“The chancellor was right in the past to call national insurance a tax on workers.”

Jonathan Reynolds, the business secretary, will hold talks with British business leaders later on Monday about the impact of the budget.

A number of executives will be given the opportunity to ask questions on a call in which more than 100 companies are expected to be represented, although one boss who is critical of many of the budget measures said they were likely to be prevented from voicing their concerns publicly on the call.

ABF, M&S and Sainsbury’s all declined to comment.