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Britain is expected to pay subsidies of around £500mn to Tata Group to support a £4bn battery factory in the UK, a facility that will power a new generation of Jaguar Land Rover electric vehicles.
Rishi Sunak, the prime minister, told MPs on Thursday that the move was a “massive vote of confidence” in the UK.
Ministers hope BMW could also soon provide good news, with plans to build a new electric Mini at its Oxford plant.
Tata could build the gigafactory at Bridgwater in south-west England in conjunction with Envision, a Chinese company, according to people briefed on the deal.
Sunak was delighted with the news, which will create around 4,000 jobs at the factory and thousands more in supply chains. It will start supplying Jaguar Land Rover and Tata Motors from 2026.
He said Britain was “well on the path to building the electric vehicle capacity that we need for the future”. With an initial output of 40GWh the new facility will provide about 40 per cent of the battery production that Britain is estimated to need by 2030.
Downing Street declined to say how much money had been spent on wooing Tata, which had considered an alternative site in Spain, adding that the subsidies would be fully disclosed “in the usual way” later in the year.
However, officials close to the deal told the Financial Times that the total could come to about £500mn, including direct grants from an “automotive transformation fund” and improvements to transport connections.
Separately, Tata will benefit from the “British Industry Supercharger”, a new energy subsidy package for 300 energy-intensive companies, providing support for many years.
Lord Nick Macpherson, former Treasury permanent secretary, was unimpressed. “I’m full of admiration for Tata’s ability to extract ever higher rents from a desperate government,” he tweeted.
Kemi Badenoch, Britain’s business secretary, said in an article for the FT that Britain was taking a new approach to supporting advanced manufacturing when other countries, notably the US, had embarked on “colossal spending sprees to claim a share of the growing market”.
Badenoch said Britain would provide “targeted support”, boost R&D, remove bureaucratic barriers, accelerate the rollout of charging points for electric vehicles and address potential trade problems.
“For those of us who still believe in some semblance of a free market, it is a battle of wits competing with countries prepared to offer eye-watering sums to pry business away from our shores,” she wrote.
Ministers are hopeful that the Tata investment will be followed by confirmation that BMW will build new electric Minis at its Cowley plant near Oxford. All Minis will be electric by 2030.
Asked about a possible Tata tie-up with Envision, a Chinese company that built the UK’s first battery plant in Sunderland and supplies Nissan’s car factory, Sunak said: “That’s a question for Tata rather than me.”
He added that Britain had laws to protect against any foreign investment that was not deemed conducive to national security interests. One British official said Tata “haven’t made a decision about Envision’s involvement”.
Tata said in a statement: “Agratas, Tata Sons’ new global battery business, will design, develop and manufacture batteries at the new gigafactory.”
Asked about a possible role of Envision, Tata said: “We will not be disclosing ongoing discussions regarding the gigafactory.” Envision was approached for comment.
Badenoch said last month that Envision was welcome to invest in Britain but that the UK had to “make sure we’re not overly reliant on one country” for battery technology.
Tata did not specify exactly where in the UK the gigafactory would be built, in a nod to electoral rules restricting sensitive government announcements before elections.
Voters in Somerton and Frome, close to the possible site in Somerset of the gigafactory, will cast their ballots in a parliamentary by-election on Thursday.
Labour officials said Tata had sought reassurance from the party that JLR would retain government support if they won the next election, expected in 2024, in a sign business is anticipating a change of government.
Grant Shapps, the energy secretary, said Tata’s decision was the “biggest investment ever” in the UK automotive industry, and the most significant boost for the sector since Japanese car companies moved to Britain in the 1980s.
Shapps said the Bridgwater site, which is close to the new Hinkley Point C nuclear plant, could produce enough batteries not just for JLR but for “half the EVs we will need by 2030”.