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UK business secretary Kemi Badenoch is urging the Treasury to provide financial firepower for a new “advanced manufacturing plan”, which will set out how Britain intends to compete in the cut-throat fight for global investment in green technology.
Badenoch and the Treasury are working on the plan ahead of chancellor Jeremy Hunt’s Autumn Statement, government insiders said, with negotiations looming over how much money to put behind the initiative.
The advanced manufacturing plan, focused on the automotive and aerospace industries, is a partial response to the $369bn package of clean energy subsidies offered by US president Joe Biden’s Inflation Reduction Act.
“There isn’t a level playing field in this area: the US IRA was an enormous state intervention,” said one person briefed on the UK government discussions.
“This is about national resilience and security but it is also about ensuring we can compete on the global stage. We have to make sure we can get the very best to invest in this country.”
Rishi Sunak was chancellor in 2021 when the decision was taken to axe the government’s industrial strategy, but elements of that plan are now being revived following business criticism.
Stephen Phipson, chief executive of the manufacturers’ lobby group Make UK, said in May: “A lack of a proper, planned, industrial strategy is the UK’s Achilles heel. Every other major economy, from Germany, to China, to the US, has a long-term national manufacturing plan.”
The recent struggle by ministers to persuade Tata Motors, parent of Jaguar Land Rover, to build a new battery factory in the UK rather than Spain was a reminder of the fierce international competition for such projects.
In July, the prime minister authorised subsidies of about £500mn for Tata to secure the gigafactory, which will supply JLR electric vehicles. Toyota and Nissan are among the companies considering whether to build new models in the UK.
Badenoch wants the advanced manufacturing plan to pull together the government’s approach to supporting clean technologies, including subsidies, skills, support for research and development, power supplies and critical minerals.
Badenoch’s allies said “new money” would be required on top of existing government schemes, such as the £850mn automotive transformation fund, which helped to support the Tata factory.
Other existing schemes include £1.4bn of joint government and industry funding to develop emerging vehicle technologies, £685mn for aerospace R&D and the £650mn “high-value manufacturing catapult” to help companies bring innovations to market.
Hunt’s allies said discussions about additional money and the precise form of the advanced manufacturing plan would not happen until after the summer.
The chancellor has previously said Britain cannot go “toe to toe” on subsidies with the US. Hunt has also announced pension reforms which he hopes will release more private capital for investment in new technology.
Hunt said in his spring Budget that he would use his Autumn Statement to “complete our response to the challenges created by the US Inflation Reduction Act”.
The chancellor has identified advanced manufacturing as one of the key growth sectors that the government wants to support, alongside digital, the creative industries, green energy, financial services and life sciences.
Badenoch wrote in the Financial Times in July that the government would not make “unaffordable spending commitments” but added “we do recognise the UK automotive sector needs certainty and targeted support”.
Lord Richard Harrington, the former Tory business minister who is writing a report for Hunt on how to attract more inward investment, told the FT last month that Biden’s subsidies to lure clean technology investment to the US were a “big threat” to the UK.
Harrington, who will report to Hunt in September, admitted that Britain cannot go “pound for dollar” against the might of the US. “But do I think we can improve our investment offer in this country? I absolutely do.”
Greg Clark, the former Tory business secretary whose “modern industrial strategy” was scrapped in 2021, has welcomed the government’s new approach.
He said that government policy must be visible and easily understood by business.
“They haven’t abolished the content of the industrial strategy,” he said. “If you look closely you will see lots of different aspects of it being continued or worked on, but it’s rather more fragmented.”
Verity Davidge, director of policy at Make UK, said: “We have called for a modern, robust, industrial strategy which is not susceptible to political chop and change.
“I think that between now and the Autumn Statement the government will have to ensure we have some response to the US IRA.”
The Department for Business and Trade declined to comment.
