The Observer view on the free market thinking that failed Britishvolt | Observer editorial

The government’s hands-off approach meant the odds were against the EV battery startup from the start

An essential pillar of Conservative party thinking has resulted in the collapse of Britishvolt, the electric vehicle battery maker and hoped-for saviour of the UK car industry. With a £3bn factory due to be built at Blyth, lighting up the Northumberland coast, the UK-owned and -run business would, in Boris Johnson’s words, “create thousands of jobs in our industrial heartlands” and boost electric vehicle production “as part of our green industrial revolution”.

Not for this government, nor any of its predecessors since 2010, the careful planning and collaboration with industry that propels investment in Japan, South Korea, China, Germany and the US. Ministers prefer to keep their hands by their sides and wallets firmly closed, in case they might be accused of a return to 1970s corporatism.

Adherence to the free market allows ministers merely to prepare the ground for major private sector investments by offering an empty field, a tax cut and some seed-corn funds in the early stages of development. As in the case of Britishvolt, private sector backers need to step forward before the government will commit significant sums of cash. And when unspoken anxiety about the government’s lack of joined-up policymaking prevents the private sector from making a significant financial pledge, the scheme can be said to have been a failure without any blame attaching to No 10.

In this most recent instance, when we say ministers, the accusation could be levelled more precisely at Kwasi Kwarteng. First as business secretary and then as chancellor, he always stood back from offering the kind of support that might have propelled the battery maker to become the backbone of the car industry.

Those in industry who dealt with Kwarteng say that, while he would listen to their ideas and offer sympathy for their plight, he would stick religiously to his belief that ministers meddled at their peril.

The CBI’s director general, Tony Danker, began his term of office in late 2020 with almost boundless enthusiasm for the Johnsonian levelling up agenda and the documents spewing out of Whitehall with business investment at the top of the agenda. Last week, his unspoken anxiety spilled out on the fringes of the World Economic Forum in Davos, where he was reported as saying that business investment was deserting the UK for want of a coherent strategy.

The normally cup-half-full business boss said Japanese, US and continental European companies were turning their backs on the UK 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 the UK stuck in a rut on growth?” and answer “Yes”.

Britishvolt was always going to pose problems for the government. The company was starting from scratch in a field already crowded with large and innovative industrial firms, including Panasonic, LG and CATL, the Chinese supplier to VW and probably the largest maker of lithium-ion batteries.

Britishvolt’s decision to develop its own battery was a high-risk plan given the levels of investment needed. Nor was any major car company committed to buying its wares. Its Swedish competitor Northvolt had followed a similar approach but with €350m of 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.

Rather than stepping back to watch its slow unravelling, successive business secretaries might have become more involved and either brought the might of UK engineering to the project, collaborated with Indian-owned Jaguar Land Rover or turned to a more viable provider. Instead, Britishvolt is bust and the UK is years behind its major rivals. Only Nissan, which has supported the Chinese-owned Envision battery factory in the north-east, has a secure domestic supply line.

Kwarteng is among many Tory ministers to read the history of the 1980s as one that put the UK on the map thanks to a Thatcherite ideological distaste for government intervention. Yet, outside the EU single market, the UK’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, will soon be going backwards.

Brexiters cast the EU as the tortoise to the brilliant British hare, which, unencumbered by bureaucracy, would defy the story’s narrative and pull ahead in the final straight.

But Britishvolt was never going to be another Josiah Wedgwood, credited by the V&A boss, Tristram Hunt, with the transformation of 18th-century Britain in his recent book The Radical Potter. Manufacturing in the 21st century is about collaboration. If we need a reminder, James Dyson, the maker of vacuum cleaners, thought himself clever enough to build an electric car and failed.

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

The £100m on offer from the puny £500m automotive transformation fund was not enough to fit out the Blyth factory. It takes so much more effort and money to keep pace in the fourth industrial revolution. Free market thinking is for yesterday’s politicians, not today’s.


Observer editorial

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