Britishvolt collapse should spark debate on whether it was actually needed
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.
The original South Wales site was selected on the basis of access to key markets and a skilled local workforce
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.
Orral Nadjari
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.
The future for the Blyth site hangs in the balance
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.
The cyber attack on Jaguar Land Rover (JLR), which halted production for nearly six weeks at its sites, cost the company roughly £200m, it has been revealed.
Latest accounts released on Friday showed “cyber-related costs” were £196m, which does not include the fall in sales.
Profits took a nose dive, falling from nearly £400m (£398m) a year ago to a loss of £485m in the three months to the end of September.
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Revenues dropped nearly 25% and the effects may continue as the manufacturing halt could slow sales in the final three months of the year, executives said.
The impact of the shutdown also hit factories across the car-making supply chain.
Slowing the UK economy
The production pause was a large contributor to a contraction in UK economic growth in September, official figures showed.
Had car output not fallen 28.6%, the UK economy would have grown by 0.1% during the month. Instead, it fell by 0.1%.
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How cyber attack ‘effectively hacked GDP’
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Reacting to JLR’s impact on the GDP contraction, its chief financial officer, Richard Molyneux, said it was “interesting to hear” and it “goes to reinforce” that JLR is really important in the UK economy.
The company, he said, is the “biggest exporter of goods in the entire country” and the effect on GDP “is a reflection of the success JLR has had in past years”.
Recovery
The company said operations were “pretty much back running as normal” and plants were “at or approaching capacity”.
Production of all luxury vehicles resumed.
Investigations are underway into the attack, with law enforcement in “many jurisdictions” involved, the company said.
When asked about the cause of the hack and the hackers, JLR said it was not in a position to answer questions due to the live investigation.
A run of attacks
The manufacturer was just one of a number of major companies to be seriously impacted by cyber criminals in recent months.
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Are we in a cyber attack ‘epidemic’?
High street retailer Marks and Spencer estimated the cost of its IT outage was roughly £136m. The sum only covers the cost of immediate incident systems response and recovery, as well as specialist legal and professional services support.
The Co-Op and Harrods also suffered service disruption caused by cyber attacks.
Four people were arrested by police investigating the incidents.
Sir Keir Starmer and Rachel Reeves have scrapped plans to break their manifesto pledge and raise income tax rates in a massive U-turn less than two weeks from the budget.
The decision, first reported in the Financial Times, comes after a bruising few days which has brought about a change of heart in Downing Street.
Read more: How No 10 plunged itself into crisis
I understand Downing Street has backed down amid fears about the backlash from disgruntled MPs and voters.
The Treasury and Number 10 declined to comment.
The decision is a massive about-turn. In a news conference last week, the chancellor appeared to pave the way for manifesto-breaking tax rises in the budget on 26 November.
She spoke of difficult choices and insisted she could neither increase borrowing nor cut spending in order to stabilise the economy, telling the public “everyone has to play their part”.
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‘Aren’t you making a mockery of voters?’
The decision to backtrack was communicated to the Office for Budget Responsibility on Wednesday in a submission of “major measures”, according to the Financial Times.
The chancellor will now have to fill an estimated £30bn black hole with a series of narrower tax-raising measures and is also expected to freeze income tax thresholds for another two years beyond 2028, which should raise about £8bn.
Tory shadow business secretary Andrew Griffith said: “We’ve had the longest ever run-up to a budget, damaging the economy with uncertainty, and yet – with just days to go – it is clear there is chaos in No 10 and No 11.”
How did we get here?
For weeks, the government has been working up options to break the manifesto pledge not to raise income tax, national insurance or VAT on working people.
I was told only this week the option being worked up was to do a combination of tax rises and action on the two-child benefit cap in order for the prime minister to be able to argue that in breaking his manifesto pledges, he is trying his hardest to protect the poorest in society and those “working people” he has spoken of so endlessly.
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Ed Conway on the chancellor’s options
But days ago, officials and ministers were working on a proposal to lift the basic rate of income tax – perhaps by 2p – and then simultaneously cut national insurance contributions for those on the basic rate of income tax (those who earn up to £50,000 a year).
That way the chancellor can raise several billion in tax from those with the “broadest shoulders” – higher-rate taxpayers and pensioners or landlords, while also trying to protect “working people” earning salaries under £50,000 a year.
The chancellor was also going to take action on the two-child benefit cap in response to growing demand from the party to take action on child poverty. It is unclear whether those plans will now be shelved given the U-turn on income tax.
A rough week for the PM
The change of plan comes after the prime minister found himself engulfed in a leadership crisis after his allies warned rivals that he would fight any attempted post-budget coup.
It triggered a briefing war between Wes Streeting and anonymous Starmer allies attacking the health secretary as the chief traitor.
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Wes Streeting: Faithful or traitor? Beth Rigby’s take
Read more: Is Starmer ‘in office but not in power’?
The prime minister has since apologised to Mr Streeting, who I am told does not want to press for sackings in No 10 in the wake of the briefings against him.
But the saga has further damaged Sir Keir and increased concerns among MPs about his suitability to lead Labour into the next general election.
Insiders clearly concluded that the ill mood in the party, coupled with the recent hits to the PM’s political capital, makes manifesto-breaking tax rises simply too risky right now.
But it also adds to a sense of chaos, given the chancellor publicly pitch-rolled tax rises in last week’s news conference.
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