Britishvolt: The UK falls behind again
Valued at £3.8 billion pounds at its peak, Britishvolt was until recently one of Britain’s most renowned up-and-coming projects.
The battery gigafactory in Blyth would provide 3,000 skilled jobs and provide the batteries needed for Britain’s electrification.
Instead, Britishvolt crashlanded into administration, as the media gradually uncovered the smoke and mirrors surrounding the endeavour.
In this article, we briefly explore what happened and what the consequences are for everyone in the UK.
TL;DR: it’s not good.
- The promise
- A brief history of Britishvolt
- Why did Britishvolt collapse?
- What are the knock-on effects?
- External Resources
The promise 😌
All the hype and expectation around Britishvolt was about delivering its initial 30GWh Li-Ion battery factory that would cover an area the size of 50 football pitches at the former coal store of Blyth coal power station.
The site was named ‘Cambois’ and is regarded as ideal for a battery factory, having:
- Access to Dogger Bank’s and other wind energy projects’ green electricity– which is essential for being as low-carbon as possible.
- Direct rail access to the deep water port of Blyth for the import/export of materials/batteries.
- Having a pre-existing connection to the national grid.
The plant was marketed by Brexiteers as one of independent Britain’s flagship projects. It helped the Conservative government win local elections in 2019 despite this constituency being a traditional Labour area or ‘red wall’.
And more factually, having a national battery production is a necessity to keeping the UK up-to-date with the global trends of decarbonisation, meet its own climate commitments, and support its local car manufacturing businesses.
Let’s take a step-by-step look at how Britishvolt collapsed:
A brief history of Britishvolt ⚡
Britishvolt was incorporated in December 2019. A year later, Cambois was selected as the ideal location for the Gigafactory.
The hype was real, and investors included Fortune 500 companies like Swiss mining giant Glencore.
In September 2021, construction began, and in January 2022, the UK government committed £100 million through the Automotive Transformation Fund.
The hype continued, and other renowned investors flocked into the venture in 2022. Amongst them are NG Bailey, Ashtead Group, Abrdn, Bank of America and Citibank, who got the company to be valued at over £1 billion, based on the promise of its gigafactory success.
In August 2022, CEO Orral Najiri was ousted, and soon after, the company’s smoke and mirrors began crumbling.
An article by The Guardian revealed prolific spending in ostentatious endeavours that included hospitality suites, luxury cars and private jet flights, despite the company having no earnings.
Another piece by FT revealed spending reached £3 million per month on wages for its 300 staff while being years away from generating any income, and hundreds of millions were being paid to Ernst & Young for consultancy services.
With their reputation on the brink, the company scrambled for capital to cover up its fragile cash flow. But they were K.O. in Round 1 as the UK government refused to advance £30 million in grants that were reserved for yet-unmet milestones
Management started working unpaid, and many staff agreed to large salary reductions, but it was too late. The company recently went into administration in January 2023, owing creditors up to £120 million.
Bids started pouring in rapidly, with a consortium of shareholders offering £30 million for the once £1 billion company.
And rumour has it that a consortium led by Australian Recharge Industries will likely win the bid, with an offer of a mere £10 million for the company and another £150 million to pay creditors and continue construction.
The consortium has the strategic advantage of having access to dependable Australian raw materials and US-battery manufacturing know-how, and adding the ideal Cambois site would boost their other facility being built near Melbourne.
Let’s now explore why the company failed so catastrophically.
Why did Britishvolt collapse? 📉
A gamble on unproven tech 🧑💻
Firstly, it appears Britishvolt believed they could out-compete existing battery giants in the R&D sector.
But sources indicate that the company was finding innovation difficult as ample intellectual property blockers were not expected.
However, Li-Ion battery demand is expected to grow to 100GWh by the end of the 2020s, and even if not building anything too cutting edge, Britishvolt was perfectly placed to fill this obvious hole in the market.
Major manufacturers prefer to source batteries from global companies like Tesla that can supply to all their factories simultaneously.
This was a major blocker to Britishvolt since they were constrained to the local UK market after losing quick access to the EU’s single market. Also, the government’s inability to clearly outline future trade deals made making products for specific markets difficult.
Also, Brexit has arguably made raising capital more difficult for British-based businesses, which may have nudged rescuing investors from making a last-minute deal to save Britishvolt after its woes were revealed.
Poor management 💼
Another often-cited reason for the failure was the unnecessary prolific spending within the business, which obviously comes from poorly executed financial management.
Again FT indicates that many investors were privately disappointed by management’s obvious lack of preparation during proposals, and internal staff were regularly disappointed by the poor communication within the company.
The final hours before administration was described as chaos, with many of its creditors going into brinkmanship to get their way, and staff learning about the company going into administration from external media.
British government 🇬🇧
Another cited cause of the failure is the UK government’s rigid financial incentives for this kind of startup, which requires a risky and aggressive capital allocation.
However, the British grants would only trigger once certain milestones were achieved, the main reason being to protect taxpayers’ money. This is arguably reasonable, but apparently a far fetch from the practices in other countries.
Covid and Supply chains 📫
The company was formed in 2019 before the COVID pandemic disrupted the global economy and supply chains.
This disruption may have played a part in its financial miscalculations, similar to other startups during this time like satellite internet company OneWeb that was ultimately rescued by the UK government.
What are the knock-on effects?
Effects on the local economy 🍞👚
The local economies of the working-class small towns of Blyth and Ashington expected to greatly benefit from the gigafactory.
Besides any direct employment, small local businesses are also expected to benefit from the increasing affluence.
With Britishvolt’s future hanging by a thread, locals have to look elsewhere for opportunities.
Effects on the British automotive industry🚗
Only one battery factory is being built within the UK to provide batteries for the automotive industries. It’s being built by Chinese firm Envision next to Nissan’s car plant in Sunderland.
Importing batteries may become a requirement, which puts the automotive sector at the mercy of the government’s ability to strike international deals while facing international competition for the limited supply of Li-Ion batteries.
In fact, if Britishvolt completely collapses, the battery capacity of the UK will be amongst Europe’s lowest, which puts the UK at the bottom of the pile when it comes to attracting any electronics manufacturing.
Batteries are the cornerstone of electrification and the technology that will ultimately make renewable energy viable.
Flywheels can be installed to take care of short-term power quality, and hydro-pumped storage can do long-term storage, but batteries are needed to fill other niches that are needed to make intermittent solar and wind energy into reliable sources of energy.
And as the global competition for batteries intensifies over the coming decade, not having a local supplier will ultimately affect the price of renewable electricity in the UK.
As usual, the taxpayer ultimately ends up footing the bill.
There are no positive takeaways to the collapse of Britishvolt.
Investors have lost out, rapid decarbonisation has taken a hit, local communities are disheartened, and British industry has become less competitive.
We hope that any takeover comes in swiftly and kickstarts the development of this key piece of infrastructure for everyone’s good.