Automakers

U.K. weighs electric car fund boost to lure green investment

Mini production Oxford 2023
BMW is building two electric models at its Oxford plant -- the three-door Mini Cooper and the Aceman compact crossover. (DANIEL KRAUS/DANIEL KRAUS)
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By:
Bloomberg
October 06, 2023 08:17 PM

The U.K. is considering plowing hundreds of millions of pounds more into its electric-car subsidy fund, people familiar with the matter said, as part of the government's response to US President Joe Biden's package of green subsidies.

Chancellor of the Exchequer Jeremy Hunt is weighing the top-up to Britain's Automotive Transformation Fund as part of the fiscal package he is due to unveil in next month's Autumn Statement, according to the people, who requested anonymity discussing plans that are not yet concrete.

The extra funding is needed because the government in recent months has paid out substantial amounts to persuade Tata Group's Jaguar Land Rover to build a £4 billion ($4.9 billion) battery factory in Britain, and to support BMW's £600 million plan to make electric Minis, the people said.

UK production slump
UK production slump (Source: Society of Motor Manufac)

With his fiscal headroom squeezed to a record low, Hunt is trying to find ways to boost the economy while keeping a tight lid on inflation that in recent months has started to come down from a four-decade high.

He is also under pressure to respond to Biden's Inflation Reduction Act, a $369 billion package of green incentives that left British politicians and businesses concerned it would lure investment away from the U.K.

The Treasury would not fund the support through extra borrowing, and is likely to allow the Department for Business and Trade to plug the fund with unspent money from other investment pots, a person familiar said. No decisions have yet been taken, they said.

The £850 million ATF is administered by the Advanced Propulsion Centre with the goal of establishing a competitive U.K. supply chain for the electric car industry. Of that, £136 million was re-directed toward the Sizewell C nuclear plant.

People familiar have said that the government forked out £500 million for the Tata plan and funneled 75 million pounds to BMW. Those payouts exhausted the fund, one of the people said.

The Business Department is now pushing for several hundred million pounds to be added to the fund as part of an Advanced Manufacturing Plan to be unveiled this fall in order to continue attracting business investment, two people said.

"Maintaining a competitive business environment to stimulate growth and productivity is critical to the future of U.K. manufacturing," the department said in a statement. "We will take decisive action to ensure future investment in zero emission vehicle manufacturing."

The Treasury did not immediately respond to a request for comment.

A funding boost would allow the U.K. to continue subsidizing business investment in areas like battery and electric motor manufacturing, which are essential to Prime Minister Rishi Sunak's pledge to grow the British economy as well as U.K. efforts to reach so-called net zero emissions by 2050.

Sunak recently watered down efforts to get there, including pushing back a ban on the sale of new gasoline-and diesel-fueled vehicles to 2035 from 2030.

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