Markets

Observer’s view of the free market thinking that failed Britishvolt | Observer editorial

A major pillar of Conservative party thinking has resulted in the collapse of Britishvolt, the electric vehicle battery maker and hoped-for savior of the British car industry. With a factory of 3 billion pound, to be built in Blyth and light up the Northumberland coast, the British-owned and -operated company would, in Boris Johnson’s words, “create thousands of jobs in our industrial heartland” and increase the production of electric vehicles “as part of our green industrial revolution”.

Not for this government or any of its predecessors since 2010, the careful planning and collaboration with industry driving investment in Japan, South Korea, China, Germany and the United States. Ministers prefer to keep their hands by their sides and their wallets firmly shut, in case they could be accused of a return to 1970s corporatism.

Joining the free market allows ministers to simply pave the way for major private sector investment by offering an empty field, a tax cut and some seed funding in the early stages of development. As in the case of Britishvolt, the private sector needs to step forward before the government will commit significant amounts of cash. And when unspoken anxieties about the government’s lack of shared policy-making prevent the private sector from making a significant financial pledge, the scheme can be said to have been a failure through no fault of No 10.

In this latest case, when we say ministers, the accusation could be more accurately leveled at Kwasi Kwarteng. First as business secretary and then as chancellor, he always refrained from offering the kind of support that might have propelled the battery maker to become the backbone of the car industry.

Those in the industry who dealt with Kwarteng say that while he listened to their ideas and sympathized with their plight, he would stick religiously to his belief that ministers were interfering at their peril.

The CBI director-general, Tony Danker, began his tenure in late 2020 with almost boundless enthusiasm for the Johnsonian leveling agenda and the documents spewing out of Whitehall with business investment at the top of the agenda. Last week, his unspoken angst spilled over on the sidelines of the World Economic Forum in Davos, where he was reported to have said that business investment was leaving the UK for lack of a coherent strategy.

The normally half-drunk business chief said Japanese, American and continental European companies were turning their backs on Britain and investing in places where they were met with more than warm words. On Monday, he will ask in a speech to CBI members: “Is Britain stuck in a growth rut?” and answer “Yes”.

Britishvolt was always going to cause problems for the government. The company started from scratch in a field already filled with large and innovative industrial companies, including Panasonic, LG and CATL, the Chinese supplier to VW and probably largest manufacturer of lithium-ion batteries.

Britishvolt’s decision to develop its own battery was a high-risk plan given the levels of investment required. Nor was any major car company obligated to buy their wares. Its Swedish competitor Northvolt had followed a similar approach, but with DKK 350 million. EUR in EU funds and major investors, including BMW and VW.

The writing was on the wall for Britishvolt last summer when its chief executive quit suddenly, and the Guardian reported leaked documents showing the company was on life support.

Instead of stepping back to watch its slow unraveling, successive business secretaries could have become more involved and either brought great British engineering to the project, partnered with Indian-owned Jaguar Land Rover or turned to a more viable provider. Instead, Britishvolt is bust, and Britain is years behind its major rivals. Only Nissan, which has backed the Chinese-owned Envision battery factory in the northeast, has a secure domestic supply line.

Kwarteng is among many Tory ministers who read the history of the 1980s as one that put Britain on the map thanks to a Thatcherite ideological distaste for government intervention. But outside the EU’s single market, Britain’s most successful manufacturing sectors – aerospace, automotive and life sciences – are struggling and with no plan in place to help them overcome the obvious barriers in their way, they will soon go backwards.

Brexiteers cast the EU as a tortoise to the brilliant British hare, who without bureaucracy would defy the narrative of history and pull ahead in the final straight.

But Britishvolt would never be another Josiah Wedgwood, credited by the V&A chief, Tristram Hunt, with transforming 18th-century Britain in his newer book The radical potter. Manufacturing in the 21st century is about collaboration. If we need a reminder, James Dyson, the vacuum cleaner maker, thought he was smart enough to build an electric car and failed.

When 100% of cars sold in the UK must be electric or hybrid by 2030, it is a new low for ministers and business department officials to brag about the cash they have saved by not investing in Britishvolt, especially when the company’s only hope of success was for the government to take strategic action.

That £100 million on offer from the paltry £500m. car transformation fund was not enough to fit out the Blyth factory. It takes so much more effort and money to keep up with the Fourth Industrial Revolution. Free market thinking is for yesterday’s politicians, not today’s.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button