Chancellor Jeremy Hunt ‘wary’ of new subsidies as companies look to US for government support
One of Britain’s only battery producers is considering shifting manufacturing from the UK to the US to benefit from American subsidies, Sky News can reveal.
AMTE Power, a Thurso-based firm with a history going back to the very earliest days of lithium ion batteries, told Sky News it is now very difficult to justify keeping production in the UK given the incentives being offered to companies to make green technology in the US.
It comes after America introduced an unprecedented set of subsidies for green companies as part of its multibillion dollar Inflation Reduction Act (IRA).
AMTE made some of the first lithium ion batteries for military customers in the 1990s
However, the Chancellor Jeremy Hunt told Sky News that Britain should be wary of any new subsidies, warning that they could undermine the economy and might even trigger a protectionist trade war.
AMTE, whose history includes having made some of the world’s very first lithium ion batteries for military customers in the 1990s, has plans for three new special types of cells: one for high-performance vehicles, one for energy storage and one very long-lasting battery.
The business is already making batches of the cells in its Thurso base but has plans to build a bigger plant – a gigafactory, as large battery plants are sometimes called – in Dundee. But the IRA has completely changed the calculus, according to chief executive Alan Hollis.
“In the Inflation Reduction Act, the typical support for the running costs of a gigafactory would be between 30 and 50% of the operating costs,” he said. “The answer is perfectly clear [about] where the most economic place for the gigafactory will be.
“We don’t have a competitive environment in the UK at this moment in time.”
Several large and small companies, including car giant Volkswagen, have announced plans to open new battery production in the US. And since the IRA covers all green technologies there are fears that other UK businesses, focused on hydrogen, carbon capture and wind power among others, might relocate.
AMTE’s warning is of particular symbolism, however, since some of the world’s very first lithium ion batteries were made at its Thurso plant.
AMTE Power’s Alan Hollis says the UK does not have a ‘competitive environment’
Mr Hollis said AMTE was now actively considering shifting its production overseas.
“We are a home-grown UK business,” he said. “We see ourselves as a UK company. We’ve developed the technology here. We want to commercialise the technology here and we want to manufacture the product here.
“But we have to ask the question if the subsidies are available overseas.”
The warning follows the implosion of the great hope for the UK battery sector, BritishVolt, which faced administration and whose plans for a gigafactory in Blythe remain in doubt.
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How lithium batteries are made
Mr Hollis said: “Unless we make the UK a competitive place for battery manufacturer, we probably won’t end up with a battery manufacturing industry in the UK. And the consequences of that are clear for the automotive industry and for the energy storage sector as well.”
However, the chancellor, who discussed the Inflation Reduction Act with his international counterparts in Washington over the past week, signalled that he had no plans for fresh subsidies.
“If you depend entirely on subsidies, there’s a risk,” he told Sky News. “First of all it’s wasteful to spend money subsidising factories that would have been built anyway. Secondly, when you take subsidies away, you can end up with a business that’s not viable.”
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Mr Hunt says the UK should be wary of any new subsidies
“So our model in the UK is a combination of some support to get businesses off the ground and then some market regulatory changes that mean those businesses have a long-term future and investment incentives through the tax system.”
Asked whether he feared the IRA would lead to more protectionism around the world, Mr Hunt said: “We can be sensible and pragmatic and develop supply chain sources through our friends – sometimes through ourselves – and continue to benefit from sharing and benefiting mutually from technology.
“If we were to turn our backs on free trade that will be a disaster for the world economy. We will enter into a dark ages period.”
Sky News’ economics editor Ed Conway and Chancellor Jeremy Hunt
The chancellor intends to reveal more details of his response to the US Inflation Reduction Act at the Autumn Statement later on this year. However, many businesses are already starting to make plans to shift production.
“The time to be thinking about making investments is now; it’s not in six months’ time. It’s now. Our competitors are getting significant advantage from their governments… We’re struggling to raise the funding and to get the government support.
“And so that ideally, what we need is a joined-up end-to-end industrial strategy from the government that enables the creation of a competitive environment for the UK battery industry here in the UK. That then enables us to become competitive and create jobs, drive the investment and achieve our green goals.”
Sir Keir Starmer has said his government stands ready to use industrial policy to “shelter British business from the storm” after Donald Trump’s new 10% tariff kicked in.
The UK was among a number of countries hit with the lowest import duty rate following the president’s announcement on 2 April – which he called ‘Liberation Day’, while other nations, such as Vietnam, Cambodia and China face much higher US levies.
But a global trade war will hurt the UK’s open economy.
The prime minister said “these new times demand a new mentality”, after the 10% tax on British imports into America came into force on Saturday. A 25% US levy on all foreign car imports was introduced on Thursday.
It comes as Jaguar Land Rover announced it would “pause” shipments to the US for a month, as firms grapple with the new taxes.
On Saturday, the car manufacturer said it was working to “address the new trading terms” and was looking to “develop our mid to longer-term plans”.
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Jobs fears as Jaguar halts shipments
Referring to the tariffs, Sir Keir said “the immediate priority is to keep calm and fight for the best deal”.
Writing in The Sunday Telegraph, he said that in the coming days “we will turbocharge plans that will improve our domestic competitiveness”, adding: “We stand ready to use industrial policy to help shelter British business from the storm.”
It is believed a number of announcements could be made soon as ministers look to encourage growth.
NI contribution rate for employers goes up
From Sunday, the rate of employer NICs (national insurance contributions) increased from 13.8% to 15%.
At the same time, firms will also pay more because the government lowered the salary threshold at which companies start paying NICs from £9,100 to £5,000.
Also, the FTSE 100 of leading UK companies had its worst day of trading since the start of the pandemic on Friday, with banks among some of the firms to suffer the sharpest losses.
Sir Keir said: “This week, the government will do everything necessary to protect Britain’s national interest. Because when global economic sands are shifting, our laser focus on delivering for Britain will not. And these new times demand a new mentality.”
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Trump defiant despite markets
UK spared highest tariff rates
Some of the highest rates have been applied to “worst offender” countries including some in Southeast Asia. Imports from Cambodia will be subject to a 49% tariff, while those from Vietnam will face a 46% rate. Chinese goods will be hit with a 34% tariff.
Imports from France will have a 20% tariff, the rate which has been set for European Union nations. These will come into effect on 9 April.
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Sir Keir has been speaking to foreign leaders on the phone over the weekend, including French President Emmanuel Macron, Italian Prime Minister Giorgia Meloni and Australian Prime Minister Anthony Albanese, to discuss the tariff changes.
A Downing Street spokesperson said of the conversation between Sir Keir and Mr Macron: “They agreed that a trade war was in nobody’s interests but nothing should be off the table and that it was important to keep business updated on developments.
“The prime minister and president also shared their concerns about the global economic and security impact, particularly in Southeast Asia.”
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Trump’s warning
Mr Trump has warned Americans the tariffs “won’t be easy”, but urged them to “hang tough”.
In a post on his Truth Social platform, he said: “We are bringing back jobs and businesses like never before.
“Already, more than FIVE TRILLION DOLLARS OF INVESTMENT, and rising fast!
“THIS IS AN ECONOMIC REVOLUTION, AND WE WILL WIN. HANG TOUGH, it won’t be easy, but the end result will be historic.”
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