[.green]1[.green] Policy Summary

To realise the benefits of transition in the battery manufacturing sector, the UK government should:

[.num-list][.num-list-num]1[.num-list-num][.num-list-text]Invest the majority of the £10.9 billion per year required to 2030 to develop the battery manufacturing capacity to decarbonise the automotive sector. This funding should be accompanied with majority public ownership stakes to ensure the public retains the maximum benefit of investment.[.num-list-text][.num-list]

[.num-list][.num-list-num]2[.num-list-num][.num-list-text]Ensure the Energy Intensive Industries Compensation Scheme (which subsidises electricity costs for high energy usage industries) provides gigafactories with continued support at a sufficient rate to accelerate the development of lithium-ion battery manufacturing, including the production of cells in the UK.[.num-list-text][.num-list]

[.num-list][.num-list-num]3[.num-list-num][.num-list-text]Ensure union recognition at all new gigafactories with a public stake.[.num-list-text][.num-list]

[.num-list][.num-list-num]4[.num-list-num][.num-list-text]Set national procurement policies to mandate that public sector vehicles are bought from UK-based producers and battery manufacturers which recognise trade unions. [.num-list-text][.num-list]

[.num-list][.num-list-num]5[.num-list-num][.num-list-text]Ensure gigafactories under majority public ownership design and implement local procurement policies to prioritise local cooperatives and socially-owned businesses.[.num-list-text][.num-list]

[.green]2[.green] Why Make Lithium-ion Batteries in the UK?

[.quote][.quote-text]To start off they [government] need a proper industrial strategy. That has to be the first thing. They have to tell us what their plans are for the country from an industrial point of view. That would be a help — something to work with because currently I don’t know what their plans are. Well, I do—their plans are to let the market decide, that’s their plans…Look we all want a just transition as we call it, but I don’t see how we’re going to get it from this government without some kind of intervention somewhere.[.quote-text][.quotee]Frank Duffy, Plant Convenor, GKN Driveline[.quotee][.quote]

[.quote][.quote-text]For me, it’s down to us. … So, you know where these factories are or where they want to be we’ve got to campaign, we’ve got to say we need this for our members otherwise our members will lose jobs… That’s how we can do it because they’re not going to do it.[.quote-text][.quotee]Peter Tsouvallaris, Plant Convenor, Toyota[.quotee][.quote]

The automotive sector employs 797,300 people across the UK. [2] Critical to the industry is automotive manufacturing, which employs 156,400 people many of whom are in secure, unionised jobs. [3] In 2019, automotive manufacturing added £15.3 billion in value to the UK economy. [4] The regional value of the industry is marked: in 2017-2018, automotive manufacturing added £4.4 billion in value to the West Midlands economy. [5] England’s regions also provide significant value to the sector. Gross value added (GVA) from auto manufacturing in the West Midlands was 41 per cent of the sector’s GVA overall in 2019. [6] The North West produced 13.5 per cent of the sector’s total GVA in the same year. [7] The West Midlands remains the heart of UK automotive manufacturing sector, with a third of vehicle manufacturing jobs, many of which are either tied directly or through supply chains to Jaguar Land Rover. [8]

Surface transport produces over a fifth of the UK’s greenhouse gas emissions and private cars produce 13 per cent. [9] While securing a strong future for the automotive industry is imperative, the scale of climate crisis is the single biggest threat to our collective futures, and automotive manufacturing, a crucial sector which contributes significantly to regional economies, requires transformation to meet decarbonisation targets.

As part of its current plan to decarbonise transport, the government will end the sale of conventional petrol and diesel cars by 2030 and make all new vehicles zero emissions at the tailpipe from 2035. [10] Yet, without an industrial strategy in place to secure a managed and rapid transition to electric vehicle production, 90,000 jobs in the automotive industry will be at risk by 2030. Indeed, concern at the lack of an active government strategy in the face of rapid change was a constant theme in interviews with automotive workers and trade unions. The workers interviewed highlighted that safeguarding automotive jobs while developing vehicle manufacturing as a source of secure, unionised employment will require an ambitious plan from government, including the development of the UK’s battery manufacturing capacity.

Domestic battery manufacturing is central to a green industrial strategy for the automotive sector for the following reasons which are explored in detail below. First, producing batteries in the UK will help the industry avoid high overall costs for vehicle manufacturing which could otherwise stem from both export tariffs and battery transportation. Second, on its current trajectory the domestic battery industry, which is currently driven by private sector investment, is unlikely to produce the manufacturing capacity required for the rapid decarbonisation of the UK automotive sector. Third, public investment in gigafactories along with public ownership stakes can anchor automotive jobs in the UK and provide strong conditions for workers.

Manufacturing batteries in the UK is necessary to lay the foundations of a thriving vehicle manufacturing sector overall, powering the motors of the electric cars, buses, vans, e-bikes, taxis and scooters of the future. At present, lithium-ion batteries are the most viable technology to replace internal combustion engines.[11] From 2027, rules of origin in the Brexit treaty will mandate that 55 per cent of the value of a vehicle must be produced in the UK or EU and that they must have an originating battery pack to avoid export tariffs. [12] Given the crucial role of exports to the automotive sector, this makes domestic battery production essential to enable vehicle manufacturing. Further, lithium-ion batteries are classed as “miscellaneous dangerous goods” and require careful handling, increasing transportation costs if batteries are imported to the UK. [13]

Our analysis shows that 80 Gigawatt-hours per year (GWh/a) of domestic battery manufacturing capacity will be needed by 2030 to maintain automotive production in the UK. [14] The UK currently has 2 GWh/a of capacity up and running. [15] This is produced by a small gigafactory in Sunderland operated by Chinese manufacturer Envision, supplying batteries to Nissan. [16] A second Envision factory in Sunderland received planning permission in 2021 as did a West Midlands gigafactory on the grounds of Coventry Airport this year. [17] A second Envision factory in Sunderland received planning permission in 2021 as did a West Midlands gigafactory on the grounds of Coventry Airport this year. [18] Britishvolt, a new company, is also constructing a gigafactory in Blyth. However, there is set to be a significant shortfall in domestic battery manufacturing which could harm the prospects of the automotive industry. Across these approved gigafactory projects which are being developed mostly through private investment, we estimate that battery production will reach 45 GWh/a by 2030. [19]

Battery production developed through private investment is not set to be sufficient to meet the needs of the future automotive industry. Increased public investment in gigafactories could accelerate the transition to meet decarbonisation targets while helping reverse the legacy of deindustrialisation in automotive communities. Our analysis reveals that the overall investment of £12.6 billion per year needed to develop gigafactory capacity to 2030 would produce a further 33,200 jobs across the UK. [20]

With £100 billion of overall investment required, private investors have already committed £12 billion to gigafactory development to 2030 while the UK government has pledged up to £1 billion. [21] Delivering the majority of this current shortfall as public investment would provide security to the sector, helping to rapidly safeguard existing jobs while ensuring the industry is on track to produce secure new jobs concentrated in the West Midlands, North West and North East of England.

As explored below, underpinning this investment with public ownership stakes could anchor these jobs in the UK. In addition, public ownership stakes in gigafactories could help overcome strategic risks to the automotive industry in the transition to EV production while investment in an alternative ownership model for gigafactories can develop battery production into an anchor of fair employment and procurement, redistributing wealth and ownership within local economies. Battery manufacturing, under an alternative model of ownership, can therefore play a critical role in delivering wealth and security for workers and their local communities.

[.green]3[.green] Reversing the Legacies of Deindustrialisation in the UK Automotive Sector

[.quote][.quote-text]I’m not old enough to remember Longbridge [2005 closure of an MG Rover plant in which 6000 jobs were lost], but I work with quite a few people there now, got family members who worked in Longbridge back in the day… If you’ve seen the impact of the surrounding area of Longbridge, Northfield, West Heath and all those surrounding areas around Longbridge when that disappeared that was catastrophic and there’s still people to this day that haven’t recovered.[.quote-text][.quotee]Jason Powell, Plant Convenor, BMW Hams Hall[.quotee][.quote]

[.quote][.quote-text]I’ve been building cars for 26 years… it’s paid my mortgage, it’s got my kids through university. Me and thousands of many others. So, the positives that it [the automotive industry] brings because they are unionised, well-paid jobs…that’s the advantage of it all really.[.quote-text][.quotee]Peter Tsouvallaris, Plant Convenor, Toyota[.quotee][.quote]

The automotive sector is critically important to workers and local communities, especially in the West Midlands, North East and North West of England. From the late 1960s, the process of deindustrialisation and the job losses which came with it produced significant and enduring deprivation in areas which relied on the industry. Despite waves of deindustrialisation, many automotive manufacturing jobs remain the foundation of local economies in industrial heartlands. Although, as outlined in more detail below, many automotive workers currently feel insecure about their futures, with the necessary levels of investment and an industrial strategy for the sector, the decarbonisation of automotive manufacturing could be a critical opportunity to ensure the UK’s automotive heartlands both revive and thrive.

In the early 1960s, the West Midlands was one of the UK’s most prosperous regions — matched only by the South East of England — but the deindustrialisation of the automotive sector across subsequent decades devastated the region’s economy. [22] In 1966, the automotive sector boasted nearly 100 per cent union membership and active unions used the power of their workforce to secure good pay and conditions for their members. [23] However, from the late 1960s onwards, the West Midlands faced the lowest economic growth of any British region; the 1973 oil crisis then hit the automotive industry and the region particularly hard. [24] This led to massive job losses: between 1975 and 1982 the fifteen largest firms in Coventry let 55,000 workers go. [25]

Despite the overall population of Coventry falling between 1971 and 1981, the number of people unemployed rose. [26] The situation worsened the following decade. As Donnelly, Begley and Collis note “between 1980 and 1983 the West Midlands suffered the highest increase in the unemployment rate, the largest contraction of the employment base and the worst long-term unemployment of any English region.” [27] This reflects the catastrophic consequences of failing to protect the automotive industry for regional economies and local communities.

This history of deindustrialisation was raised consistently by the automotive workers interviewed as part of this project. More recent examples — such as the closure of the MG Rover plant at Longbridge in 2005 — were cited by Jason Powell, the youngest union rep interviewed. Union reps also highlighted that the jobs which remained offered them financial security and stability, partly due to the strength of collective bargaining in the sector. However, a 2022 survey of Unite members in the automotive industry found that 48.6 per cent of respondents felt insecure in their jobs. [28] Addressing this insecurity and ensuring the long term sustainability of unionised work in the industry is a critical challenge, but it also represents an opportunity: with ambitious investment to secure the gigafactories of the future, our analysis shows that the transition to EV production could preserve existing jobs in the West Midlands and create a further 10,400 secure, unionised jobs by 2030. [29] In the North West and North East, the transition could create an additional 4600 and 5900 jobs respectively. [30] Decarbonising the automotive sector can therefore bring prosperity to regions hit by decades of deindustrialisation if an ambitious green industrial strategy is put in place. Domestic battery manufacturing — through the establishment of gigafactories with public ownership stakes that anchor jobs in the UK — can play a critical role in this.

[.green]4[.green] What Role Can Public Ownership Play in Battery Manufacturing?

[.quote][.quote-text]The amount of companies that have accessed that fund to research and develop these products but then were not taking it forward and creating jobs in this country. … It’s criminal that companies are allowed to use taxpayers’ money to do that and then offshore the work to other countries. It shouldn’t be allowed. We’ve got all the skills, we’ve got all the technical knowledge, we’ve got the workers, we’ve got skilled workforces, we’ve got plants, we’ve got everything that we can transition, we can do it. … But unfortunately, if it’s left to market forces which it always seems to be under this government, most businesses will take the option of where can we maximise the profit for the business. That’s always what it’s built around…We’re talking about a just transition. Our company’s moving all the work to Poland, and most of their energy is supplied by coal-fired power stations…Where’s the just transition there?[.quote-text][.quotee]Frank Duffy, Plant Convenor, GKN Driveline[.quotee][.quote]

An ambitious green industrial strategy underpinned with public ownership stakes in gigafactories can help preserve and create good jobs in vehicle manufacturing while ensuring that decarbonisation is delivered at pace. As explored below, public ownership stakes in battery manufacturing can ensure that the benefits of public investment are retained by communities, prevent plants from moving overseas and help overcome strategic risks to the decarbonisation of the automotive sector. The current approach of the government, however, is not to intervene at a significant scale in the automotive industry. In 2021, the Department for Transport announced it would “set direction, remove barriers and support the early market, but it is the private sector that will lead the charge towards mass ownership of zero emission vehicles.” [31] This support has involved limited public investment in research and development as well as a £1 billion Automotive Transformation Fund, part of which can be invested in gigafactories. [32] Government’s current approach carries several risks both to manufacturing jobs and to the pace of decarbonisation which can be alleviated with greater intervention and the development of alternative ownership models.

In November 2021, over 500 workers at GKN Erdington (a factory in the West Midlands automotive supply chain) were forced to accept a redundancy package that will see them lose their jobs when the plant closes this year. In our interview, the GKN plant convenor Frank Duffy described the offshoring of jobs:

[.quote][.quote-text]Our company’s had millions and millions of pounds of taxpayers’ money to research and develop these new products which they’ve done in Oxford at our research and development facility. None of them jobs will be created in the UK. …Most of our work now is going to Poland simply because of the cheaper labour rates they’ll make more profit making them there than making them here.[.quote-text][.quote]

Duffy explained how research and development funding has enabled some private companies to develop electric vehicle technologies in the UK, but the lack of a comprehensive industrial strategy risks production and further investment being moved to more favourable conditions elsewhere. Public investment needs to be set within a strategy for the sector that ensures new technologies are used in domestic production. Investment at scale in gigafactories would ensure that vehicle manufacturers are guaranteed the batteries they need to decarbonise production while creating a new, secure base of work in the battery sector. Accompanying investment with public ownership shares in gigafactories will give the government the ability to ensure that production remains in the UK, providing a backstop against the offshoring of jobs.

While public stakes can help anchor manufacturing jobs in the UK, they can also provide the base to coordinate and deliver decarbonisation at the pace needed. As Alex de Ruyter et al argue, new private gigafactory startups such as Britishvolt and Inobat — a company connected with the proposed Coventry Airport gigafactory — do not yet have any major confirmed customers, which could inhibit the scaling of production. [33] Greater public investment, alongside public ownership stakes, would provide sustained funding to scale battery production, providing space to coordinate agreements with manufacturers of different vehicle types, and give the government the ability to accelerate the transition overall.

Public equity stakes in exchange for increased investment would ensure greater public influence over the automotive sector, which is already the case — albeit at a smaller scale — in France and Germany. Both Renault Group and Volkswagen have a split ownership model which includes significant public equity. The French government has a 15 per cent stake in Renault while the German state of Lower Saxony has an 11.8 per cent equity stake in Volkswagen with 20 per cent voting rights. [34] Toyota union rep Peter Tsouvallaris cited Renault’s ownership model as a positive example during an interview for this project, arguing that the French government stake has helped prevent plants moving overseas.

The development of gigafactories driven by public investment and public ownership could also allow government to accelerate the speed of the transition where it is not deemed profitable by private companies. Producing the cells from which lithium-ion batteries are assembled and which contain at least a third of their value is a highly energy-intensive activity, requiring huge amounts of electricity. [35] The rising costs of the domestic electricity supply pose a risk to rapid manufacturing development; even in 2019, UK electricity cost more per KWh than every country in the former EU15 other than Italy. [36] Part public ownership of gigafactories could help absorb some of these costs alongside continued subsidy through the government’s Energy Intensive Industries Compensation Scheme. [37] Together, these policy approaches can prevent delays to the rapid construction of gigafactories. Providing the support for viable cell production in the UK would also ensure that integrated battery manufacturing is not replaced by lower-value battery assembling from cells produced elsewhere, retaining more jobs in the automotive sector. Greater intervention and alternative ownership models are critical to preventing offshoring overall, ensuring the rapid scaling of manufacturing capacity and meeting strategic challenges in UK battery production.

[.green]5[.green] How Can Investment in Gigafactories Help Decarbonise Public Transport?

As Common Wealth analysis shows, securing increases in manufacturing jobs through gigafactory development would require £12.6 billion per year of overall investment over the next eight years. [38] This investment, alongside public ownership stakes and more effective coordination of industry, can also provide a foundation for diversification and conversion in the existing automotive supply chain where necessary. New gigafactories can produce batteries that help develop the manufacturing of public transport vehicles and a wider set of mobility options, such as e-bikes and scooters. This can ensure greater security for workers in at-risk sections of the automotive supply chain and increase access to varied mobility options in the transport system.

While components represent 50 to 55 per cent of the value of an internal combustion engine car, they only represent 35 to 45 per cent of the value of a zero emissions vehicle. [39] During discussions for this project, trade unions consistently raised concerns that this could pose risks to some jobs in the current automotive supply chain. The production of some components could therefore require conversion or diversification as the industry transitions to zero emissions vehicle production. This could involve the increased production of vehicles for public transport, ensuring that the transition to new forms of zero-carbon mobility is matched with domestic manufacturing jobs. Gigafactories, with public stakes rooting secure employment in the UK, could provide the battery supply necessary to increase the manufacturing of zero emissions vehicles for public transport, meeting the need to convert parts of the automotive supply chain.

In the EU, new manufacturing conversion funds are needed to diversify some parts of the automotive supply chain into the production of vehicles for public transport. [40] German train company Deutsche Bahn, for example, can currently face years of delays for new vehicles due to a lack of production capacity. However, conversion in some parts of the automotive sector could help address this gap in capacity while delivering secure employment. [41] A lack of industrial strategy for UK public transport manufacturing was a repeated concern of trade unionists interviewed in this project. Steve Bush, Unite’s national officer for automotive, noted that while the government has repeatedly announced its ultra-low emissions bus strategy to provide funds for 4000 new electric buses, “this is at a time when we’ve got ADL closing a site, a chassis site in Guildford, a historical site of 134 years and allowing work to be transferred to Turkey where it’s far cheaper.”

Gigafactories can produce the battery supply at the centre of a green industrial strategy for the transport system, enabling a transition to a range of transport options — an approach supported by a citizen’s commission set up by the Institute of Public Policy Research. [42] The commission saw an approach to decarbonisation that provided increased zero-carbon public transport as the fairest for working-class people, addressing inequalities in access to transportation. [43]

Securing battery manufacturing as the foundation for a wider shift in the UK transport manufacturing sector can crucially produce benefits both for workers and for their local communities.

[.green]6[.green] Anchoring a Green Industrial Future

Community wealth building is an economic strategy that seeks to democratise ownership within local economies and create bases of fair employment in part through the procurement policies of “anchor institutions”. [44] The adoption of a community wealth building strategy and just procurement policies underpinned by the majority public ownership of gigafactories can help cement battery production within local communities. As anchor institutions in local economies, gigafactories can provide strong bases of unionised employment in green industries and start the process of redistributing wealth and ownership towards local communities.

Public ownership and oversight can develop gigafactories into anchor institutions or organisations which have an “important presence in a place”through employment and procurement and are tied to place through their histories. [45] In this case, the historic presence of the automotive sector in regions like the West Midlands ties gigafactories to the UK’s automotive heartlands. Majority ownership stakes would give the public sector oversight of gigafactory management, enabling government to encourage fair employment practices in collaboration with unions. Gigafactories could therefore become bases of employment with strong terms and conditions for their local communities. Public influence over management of gigafactories would also enable government to regulate procurement policies. Following a community wealth building model, gigafactories could procure goods, including components and services, from local cooperatives as well as local businesses, prioritising those that are socially owned. This would encourage democratic ownership within gigafactories’ local supply chains and strengthen the connections between communities and manufacturing sites.

The trade union representatives interviewed for this project also highlighted the importance of procurement policy as part of a national green industrial strategy for the automotive sector. To support the development of gigafactories as anchors in their communities, government could set public procurement to increase demand. While the UK has a £292 billion public procurement budget which could be used to maintain baseline demand for domestic manufacturing, government is currently missing an opportunity to direct procurement towards social value. [46] Nearly three quarters (74 per cent) of vehicles procured by public bodies in the UK are not produced domestically. [47] Mandating public sector procurement of electric vehicles and their batteries from domestic factories would support the development of green automotive manufacturing as an anchor within local economies. This would ensure that public investment retains its maximum social value and help redistribute wealth within local supply chains.

[.green]7[.green] Building a Giga-Commons

As part of an industrial strategy to ensure the benefits of decarbonisation are channelled to automotive workers and their communities, investment in gigafactories would secure critical manufacturing jobs in the UK on strong terms and conditions. A separate briefing will cover the policies required to ensure justice for workers in global battery supply chains as well as the just trade policies necessary for the transition. Delivering this first set of critical policies, which are necessary to provide a foundation for the future of vehicle manufacturing in the UK, will ensure that wealth produced through decarbonisation is directed to regional economies.

[.green]8[.green] Key Priorities

To realise the benefits of the decarbonisation of the automotive sector, the UK government should:  

[.num-list][.num-list-num]1[.num-list-num][.num-list-text]Invest the majority of the £10.9 billion per year required to 2030 to develop the battery manufacturing capacity to decarbonise the automotive sector. This funding should be accompanied with majority public ownership stakes to ensure the public retains the maximum benefit of investment. Gigafactories should be used to produce batteries for a full range of electric vehicles including buses, cars, taxis, e-scooters and e-bikes.[.num-list-text][.num-list]

[.num-list][.num-list-num]2[.num-list-num][.num-list-text]Ensure the Energy Intensive Industries Compensation Scheme (which subsidises electricity costs for high energy usage industries) provides gigafactories with continued support at a sufficient rate to accelerate the development of lithium-ion battery manufacturing, including the production of cells in the UK.[.num-list-text][.num-list]

[.num-list][.num-list-num]3[.num-list-num][.num-list-text]Ensure union recognition at all new gigafactories with a public stake and work with unions to deliver employment practices that meet worker demands.[.num-list-text][.num-list]

[.num-list][.num-list-num]4[.num-list-num][.num-list-text]Set national procurement policies to ensure that public sector vehicles are bought from UK-based producers and battery manufacturers alongside social licensing to guarantee that public procurement comes from organisations that provide social benefits and recognise trade unions. [48][.num-list-text][.num-list]

[.num-list][.num-list-num]5[.num-list-num][.num-list-text]Ensure gigafactories design and implement local procurement policies to prioritise local cooperatives and socially-owned businesses where possible.[.num-list-text][.num-list]