Britishvolt: the UK’s EV strategy can’t run on fumes

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Depending on how you look at it, the fact the great hope for Britain’s electric vehicle battery industry lies with a three-year-old company that at launch had no product, no customers and limited industry expertise is either a great triumph of the UK start-up scene or a terrible failure of national industrial strategy.

Britishvolt pitched up in 2019 with plans to build a gigafactory. Given the main thing it had going for it at the time was a patriotic name, it has made surprisingly good progress. It now has some technology, a prime site for its factory, the former chair of Ford’s UK operations as its boss and financial backing from Glencore, Ashtead and — in theory — the UK government.

What it lacks is enough money to continue beyond the end of the year (or any concrete customers).

It would be easy enough to blame the UK’s lack of industrial vision for the shortfall. Successive Conservative governments have hardly been consistent in their post-Brexit industrial policy. The current one’s refusal to advance some of the £100mn committed to Britishvolt without milestones being met has undoubtedly contributed to the precarious financial state of the project.

But in this case the government has done more or less what it should to support a speculative start-up: lent it some credibility without throwing around money it might not get back. The problem may be that too much is being asked of this particular start-up. The UK really does need gigafactories. It shouldn’t need Britishvolt to be the one to build them.

One of the main issues is that, at 30 gigawatt-hours plus per year, the planned Britishvolt factory at Blyth in north-east England accounts for such a large chunk of the 98GWh of battery capacity the Advanced Propulsion Centre (APC) estimates the UK needs to support its domestic car industry by 2030.

To hit the APC’s estimate might require five to eight gigafactories. The Faraday Institution, the UK’s battery research institute, predicts that 10 will be needed by 2040, each producing 20GWh of batteries. Current UK capacity is 2GWh.

It is possible for batteries to be made elsewhere and shipped to the UK. But that is expensive and rules of origin under the Brexit deal mean an increasing proportion of components have to be sourced locally. As David Bailey of Birmingham Business School puts it: “Without batteries being made at scale in the UK, it doesn’t make sense to have a car industry at scale.”

The obvious way to make up some of the capacity shortfall would be for the government to work with the existing big UK car manufacturers to figure out what they need and then woo established battery producers — mainly Chinese and South Korean companies — to deliver it on British soil. Chinese-backed Envision AESC already supplies Nissan’s Sunderland plant through the UK’s only operational gigafactory. It has plans to expand significantly, with government backing.

The problem is that because the big car companies are owned outside the UK, their battery sourcing plans tend to be determined outside the UK. The market is fiercely competitive, with the EU ploughing billions of euros into attracting battery manufacturers. A long-awaited decision by Jaguar Land Rover over where to source its electric vehicle batteries is key for Britain.

But the APC and the Faraday Battery Challenge, a state-backed body funding the development of the UK battery industry, both say that what the UK needs is a mix of players, some big, some medium — and some start-ups. They argue that the speed of the switch required to meet electric vehicle targets and the level of demand is such that new entrants are going to be needed. Northvolt, now one of Europe’s largest battery makers with contracts with VW and Volvo, is only five years old.

That shows that it is possible for start-ups to become successful battery businesses, though, not that Britishvolt is entitled to government funding to become one. Government support will be needed for the sector — the UK’s electric vehicle strategy cannot run on fumes. But there are still questions that need answering about Britishvolt’s strategy.

The challenge for government is to reassure potential investors that the UK has a consistent and coherent battery strategy — in other words, that refusing to advance funds to Britishvolt does not mark a volte-face. The UK needs gigafactories. The more it can do to encourage investor confidence, the cheaper building them will be for the public purse.

cat.rutterpooley@ft.com
@catrutterpooley