In mid-January the electric vehicle (EV) battery manufacturer Britishvolt went into administration, with debts thought to have been as high as £120m. There was widespread dismay and horror at the loss of 200 jobs and of the prospect of 3,000 more that would have been created at a planned £3.8bn “gigafactory” on a 93-hectare site at Blyth in Northumberland.

Founded only in 2019, within three years Britishvolt had secured a pledge of £100m in funding from the UK government, alongside investment from major businesses including Glencore and Ashtead. But ultimately it failed to secure orders that could have attracted the investment it needed. Turmoil in the financial markets caused in part by the war in Ukraine and in part by political events at home added to its difficulties. 

But while exactly what went wrong is still unclear, the important question is: what does this episode tell us about the ability of the UK automotive industry to attract the investment it will need during the transition away from petrol and diesel cars to mass use of EVs?

With a ban on the sale of new petrol and diesel cars due in 2030 and a ban on sales of new hybrid vehicles to follow five years later, that transition is coming. It presents significant challenges but also new opportunities for an automotive industry that has struggled in recent years. UK car production fell 9.8% in 2022, according to figures released by the Society of Motor Manufacturers and Traders (SMMT) in January – but production of EVs rose by 4.8%. Exports of EVs, which the SMMT describes as “critical to the future prosperity of the UK” are now worth £1.3bn per year.

Releasing these figures, SMMT Chief Executive Mike Hawes spoke of the importance of “a strategy to drive rapid upscaling of UK battery production and the shift to electric vehicles based on the UK automotive sector’s fundamental strengths: a highly skilled and flexible workforce, engineering excellence, technical innovation and productivity levels that are among the best in Europe.” 

He expressed similar sentiments following the news of Britishvolt’s collapse, listing key attributes of the UK as an EV battery production location: “strong demand, a skilled workforce and attractive manufacturing sites”. Together, he said, these comprised “a compelling investment proposition”. 

Is that true? Or does the Britishvolt failure reveal fundamental weaknesses in the industry’s ability to attract investment?

Battery manufacturing will certainly be vital for the UK’s EV manufacturing capability. For reasons of cost, practicalities and rules of origin for tariff-free exports of UK-made products to the EU, the batteries need to be built in the UK. At present there is only one EV battery plant in the UK, the Chinese-owned Envision plant near Nissan’s factory in Sunderland. The Blyth gigafactory was intended to supply 30 gigawatt hours (GWh) of batteries each year, but by the end of the 2020s UK car plants are expected to need up to 100GWh. 

ICAEW Managing Director, Reputation and Influence, Iain Wright, himself a native of north-east England, is keen to focus on the possibility that the Blyth site may still be used by another business. “There are grounds for optimism about the future of the site,” he insists. “If we want a UK car industry for the 20s, 30s and 40s, we’ve got to have the capability to research, design and manufacture EV batteries at scale.”

Wright sees the north-east as a prime location for this capability, in part because of the long-term legacy of Nissan’s Sunderland plant in developing a skilled, flexible workforce, but also thanks to other physical assets, including the Tyne deep water port. But other elements would be needed to create an ideal setting for a large EV battery factory, says Cristóbal Colón, partner in the industrial and consumer practices at LEK Consulting. 

He points out that attracting investment for the gigafactory project would have been more straightforward with backing from a major vehicle manufacturer. In Spain, for example, a battery plant of similar capacity to the planned Blyth facility is being built near Valencia by Volkswagen-owned Seat. Government support is also clearly crucial: Seat is drawing on €397m of EU pandemic recovery funding, via the Spanish government. 

Wright also recognises the need to build foundations that investors can trust. “Investors need as much stability and support as possible,” he says. “But if we can get the infrastructure in place, with long-term government support, then the risk and the cost of capital go down.”

There has been some positive news in recent months. In December 2022 Ford announced a £125m investment at its Halewood plant, in Merseyside, and a £24m investment in its EV development centre in Essex, as it pursues an ambition to be building only electric-powered vehicles in Europe by 2035.

Storme Durose is now financial controller for Collins Aerospace, but until December 2022 she was a finance business partner at Jaguar Land Rover, having previously developed expertise in the automotive industry at PwC. She points out that all the major manufacturers operating in the UK have made major commitments to building EVs here. Their huge collective financial and commercial heft will surely help to attract investment. “It’s a terrible shame about Britishvolt, but I think we should be very optimistic,” she says.

But another worrying feature of the SMMT figures is falling exports, down 14% in 2022. Brexit has created some extra problems – the EU is by far UK vehicle manufacturers’ largest export market, with a 57.6% share – but so has the expense of the highly skilled UK labour force. Durose fears the same factors that are reducing exports will make it harder to create homegrown battery manufacturing capacity. 

“Even with all the incentives the government can offer I don’t think we’ll be competitive enough to build more battery plants,” she says. 

Some UK policymakers and automotive businesses also seem to lack long-term vision, says Colón. He stresses the need to invest in developing other technologies that may replace or enhance EV batteries, such as hydrogen fuel cells. Producing ‘green’ hydrogen is difficult and expensive, but the key inputs are water and energy generated from renewable sources, both available within the UK, whereas lithium-ion batteries require imported lithium, nickel and cobalt – supplies of which could be disrupted by political events. 

Intriguingly, Colón thinks UK businesses may be able to accelerate development in EVs more quickly than their counterparts in the EU. “I was not in favour of Brexit,” he says, “but Europe is very bureaucratic and decisions can be slow. If the UK has the right plan and puts the right resources in, it can be a leader in the future.”

He wonders if the collapse of Britishvolt might even prove helpful in the longer term. “Maybe this situation is a good lever in terms of trying to push the government to make the right plan to transform the UK automotive industry,” he says. “Maybe now they will realise that they need to put more investment in if you are going to transform the automotive industry.”