Gigafactory plans close to collapse raising fresh doubts about UK car industry

Flagship industry in race against time to build battery production to meet looming ‘rules of origin’

Plans for a £3.8bn battery gigafactory are close to collapse, in a move raising fresh questions about the UK car industry following the Brexit trade deal.

The troubles that have hit the UK start-up Britishvolt are also a major embarrassment for Boris Johnson – who hailed the firm as a key part of his “Green Industrial Revolution” earlier this year.

The firm – which planned to create 300 jobs through the factory in Northumberland – is poised to enter administration after struggling to find investors.

A promise of £100m of financial support promised while the current prime minister, Rishi Sunak, was chancellor is now expected to be withdrawn, with the factory not yet bought.

Britishvolt has blamed its problems on deteriorating market conditions after Russia’s invasion of Ukraine, leaving it burning £3m in cash a month to pay salaries, according to the Financial Times.

But the firm has hit trouble with the flagship UK car industry predicted to leave for continental Europe unless a race against time to build battery production is won.

In 2027, new trade rules will come into force on what constitutes “made in the UK”, for the purposes of tariffs and quotas, following the decision to leave the EU single market.

These ‘rules of origin’ dictate that at least 55 per cent of a finished car’s value must be derived from either the UK or the EU, to avoid new punishing export tariffs.

With the switch to electric vehicles – and with the battery the most valuable part – it has become crucial that they are made locally, but the UK lags far behind Germany and other countries.

Jonathan Reynolds, Labour’s shadow business secretary, said: “This disastrous news is a further reminder that the economic crisis made in Downing Street is costing jobs and investment.

“It is a sight that has become all too familiar – businesses going under, jobs being lost, and investment in the industries of the future going abroad rather than the UK.”

And Naomi Smith, chief executive of the Best for Britain campaign, which wants closer ties with the EU said: “Brexit has already helped the UK shed thousands of car manufacturing jobs.

“The loss of this factory would not only be a bitter blow to the North East, but emblematic of the government’s failure to grasp the opportunities of the green tech revolution or to deliver on their promise of high-paid, high-skilled employment post-Brexit.”

The company was expected to announce an administration as soon as Monday, three sources with knowledge of its operations told the FT.

A Britishvolt spokesperson said: “Company policy is to not comment on market speculation.”