Huge UK electric car battery factory on ‘life support’ to cut costs

Construction of a huge electric car battery factory that has attracted tens of millions of pounds of taxpayer cash and been hailed as a flagship project of Boris Johnson’s levelling up policy has been put on “life support” to cut spending, leaked internal documents suggest.

Work on Britishvolt’s 95-hectare site near Blyth in Northumberland has been severely limited until February to minimise spending as it focuses on unlocking its next round of funding and critical power supply infrastructure, the documents suggest.

Britishvolt, which since its formation in 2019 has made a string of increasingly ambitious promises about powering the boom in electric cars, chose the “life support” option in order to “minimise cash out”, the presentation dated 25 July suggests.

Britishvolt and ISG, its main construction contractor, said the pause affected only some parts of the project while they awaited final designs which are due in October. Britishvolt said “life support” in the documents only referred to specific “packages of work as we optimise the design”.

Battery factories for electric cars are seen by the UK government as essential to preserving high-volume car manufacturing in Britain. Business minister Kwasi Kwarteng last month confirmed state support thought to be worth tens of millions of pounds for the factory, which is planned to employ 3,000 people by 2028 in an area previously left behind by industry.

The state support, first promised as early as January, was confirmed on 27 July, two days after the date on the documents seen by the Guardian.

The documents also discuss “mitigations … to deal with imature [sic] design and design release delays” ahead of an institutional investor contract due on 5 September.

Britishvolt has attracted an increasingly stellar cast of backers including FTSE 100 commodities trader Glencore, FTSE 100 equipment rental company Ashtead, and Tritax, an arm of Abrdn, a major institutional investor. Aston Martin and Lotus have also formally said they are interested in buying batteries from Britishvolt.

It has said its factory will be the fourth-biggest building in the UK and the sixteenth-biggest in the world.

Britishvolt claims the backing announced so far could eventually be worth more than £1.7bn, a significant share of the estimated £3.8bn that may be required. However, the company will only receive the money in stages as it achieves milestones.

Tony Laydon, Britishvolt’s chief UK project officer, told the Guardian that work is still continuing at the site, but that some contractors had left because packages of work, including moving soil to prepare the site, had finished.

He said the company was “ahead” with the building work, but acknowledged it was focusing on some priority areas ahead of others.

Any delays would have a “fairly small” financial impact and did not threaten the viability of the overall project, he insisted. “We have line of sight funding to continue with our current plans,” he said.

The government funding is expected to eventually give the project an important injection of cash, as well as reassuring other investors, but there have been concerns over delays. Johnson last month faced a question about the delay in parliament from the Labour MP for Wansbeck, Ian Lavery. A government source said officials had carried out in-depth due diligence on the project.

Britishvolt was founded in 2019 and quickly won the approval of government. However, it has also faced controversies, most notably the abrupt departure of co-founder Lars Carlstrom in 2020 after it emerged he had been convicted of tax fraud in Sweden in the 1990s. The company is now led by chief executive Orral Nadjari, a former investment banker.

Short-term funding problems would not be unusual for a start-up with ambitious growth plans. However, if delays or problems with suppliers were to build up they might affect Britishvolt’s stated aim of starting production by 2024.

The documents suggest a “funding gap” may have caused delays to the installation of steel infrastructure to be procured from British steel company Severfield. Earthworks have also been delayed by “lack of payment”, they suggest.

“We’re a start-up company, so we’re not in a unique situation,” Laydon said, but he added he did not recognise the description of a “funding gap”.

As well as the “life support” plan, Britishvolt considered but rejected several other options, including making redundancies, terminating all contracts and delaying all works other than electricity infrastructure until June 2023, the documents suggest.

In statements, Britishvolt and ISG said that subcontractors and workers have been paid for all work carried out so far, and that works were progressing on schedule.

Britishvolt said it was continuing with spending on building a separate research and development facility in Hams Hall, in the West Midlands, as it races to get the first battery cells to customers.

“We are ahead in our enabling works at the gigasite in Northumberland,” a spokesperson said. “This has allowed us to now take the time to focus on the design work for the site and to reschedule some construction work so that we can optimise the build process for each of the project’s four phases, to better source materials given current supply constraints because of the global economic situation, and to enhance our cost efficiencies.”

ISG said: “We are now pausing works on-site while the design is finalised and remain a committed and passionate partner in this transformative scheme for the people of Northumberland.”