The Indian industrial giant Tata wants to invest the equivalent of 4.6 billion euros in England to build a battery factory. This was excellent news for Prime Minister Rishi Sunak four weeks ago: “This is one of the largest investments in the automotive sector. Here we see the transformation to electric cars. Thousands of jobs are being created,” Sunak told Sky News at the time.
From the company’s point of view, there were good reasons for the investment: Tata owns the English brands Jaguar and Landrover. The need for car batteries will also be great in the UK. But that alone was apparently not enough. The group is said to have received subsidies of 600 million euros. This number has not been officially confirmed.
Heavily courted battery manufacturer
The UK is in a race to attract industry. More and more corporations can choose where to settle. Subsidies play an important role. The US has launched a multi-billion dollar subsidy package, the “Inflation Reduction Act”. And the European Union is also providing much more generous funding and will launch a similar package in the fall, called the “Net Zero Industry Act”.
The “Inflation Reduction Act” was a “game changer” and changed everything, says David Bailey, professor of economics at the University of Birmingham. As an example, he cites the traditional car manufacturer Lotus, which belongs to the Chinese group Geely. “Even UK-based Lotus is considering building a plant in the US, made possible by money from the Inflation Reduction Act.”
And the British company Tevva, which makes battery and hydrogen-powered trucks, also felt strongly courted. Founder Asher Bennett said he could get around €100,000 more in subsidies per vehicle in Germany than in England.
Ideologically divided Tories
But at the moment it doesn’t look as if the government can do anything to counteract the huge subsidy packages in the USA and the European Union. “The government is very cautious about spending extra money. Finances are very tight,” says Jill Rutter of the Institute for Government think tank. “The government does not want to unsettle the financial markets with further debt. The most important goal at the moment is: Inflation must fall.”
2024 is the year of elections in Great Britain, so short-term successes are much more important. In addition, the Conservative Party is divided on the fundamental question of whether subsidies are the right economic policy tool. “There is a deep-seated ideological split within the government,” said economist Bailey. There are liberal politicians who reject subsidies. Others in the party advocate the payments to spur the shift towards a “green” economy and, most importantly, a zero-carbon future.
