Jaguar Land Rover’s gigafactory under construction in Somerset has received a £380m tax grant as part of a £700m package.
Announcing the funding at the Bridgwater site on Wednesday, Business Secretary Peter Kyle described the intervention as the clearest signal yet that Whitehall intends to stay on the playing field where he said previous governments had been on the sidelines. “In an unstable world,” he said, the government’s industrial strategy is about giving investors “the stability and confidence they need” to plan a decade ahead.
For the SME community watching nervously from the fringes of the automotive ecosystem, the more interesting numbers lie beneath the eye-catching JLR headline. Of the remaining £320m, £100m is earmarked for companies in the West Midlands and North East to retool factories and retrain workers for the electric vehicle supply chain, while a further £47m will go towards smaller battery innovation projects. Additional tranches will support the introduction of AI, robotics and digital manufacturing technologies in smaller engineering companies, as well as skills funding for sixth form and post-secondary universities.
The main beneficiary remains Agratas, the Tata-owned battery company and sister company to JLR, whose Bridgwater factory will eventually supply cells for Range Rover and Jaguar models rolling off production lines in the West Midlands from 2028. The first battery-powered Jaguars are expected to hit the road next year, using cells manufactured at Agratas’ existing facility in Gujarat. JLR has committed to phasing out internal combustion engine production by 2036.
Bridgwater will become Britain’s second gigafactory of significant scale, joining Nissan’s Sunderland operation, which already supplies cells for the Leaf and is preparing to produce electrified versions of the Juke and Qashqai. JLR and Nissan, the country’s two biggest car employers, will share a further £90m earmarked for research and development to reduce costs of next-generation electric vehicle platforms.
The announcements come under the umbrella of Drive35, the government’s decarbonization plan launched last year, which will provide £4 billion to the sector by 2035. Ministers claim the program will ultimately create 50,000 jobs and unlock £7.5 billion of private investment. While these figures are ambitious, they depend heavily on whether smaller UK suppliers can grow quickly enough to capitalize.
Smaller companies to benefit include Birmingham-based HyProMag, which recycles rare earth magnets used in electric vehicle engines, as well as Maeving, the Coventry-based electric motorcycle manufacturer, and Banbury-based Elm Mobility, a last-mile delivery vehicle specialist. Also named is McMurtry Automotive, the Cotswold-based hypercar manufacturer founded by late Renishaw co-founder Sir David McMurtry, which produces electric rail vehicles at a cost of around £1 million apiece.
However, not every recipient is in robust health. Surface Transforms, the Liverpool carbon ceramic brake disc specialist, has been named as the winner of the scale-up funding despite going into administration last month, triggering the delisting of its Aim listing. An official at the Ministry of Economy and Trade confirmed that the company had been “successful in the application process” but had not yet passed the financial due diligence required to release funds, a detail likely to raise eyebrows in the investment community.
In a departure from the usual grant allocation, the government has also decided to take a 10% equity stake in listed hydrogen specialist ITM Power, comprising a £40 million cash injection and a £46.5 million grant for the company’s electrolyser development program. The move represents one of the clearest examples yet of direct government involvement in a listed green technology company and could provide a template for future interventions.
The timing of the package is no coincidence. Figures from the Society of Motor Manufacturers and Traders this week showed new car sales rose 6.6 per cent year-on-year in March, the strongest monthly performance since 2019 and evidence that consumer confidence is returning to the UK car market, ministers argue. Given geopolitical volatility, fragile supply chains and an intensifying global battle for battery production capacity, the government’s message to the industry – and to the international investors it courts – is that Britain is open to long-term business.
For the SMEs that operate in the slipstream of JLR and Nissan, it is now a matter of implementation. Grants and gigafactories make for attractive photo ops; Building a resilient, globally competitive domestic supply chain in less than a decade is a slightly more difficult task. The Bridgwater site alone is expected to create 4,000 jobs when fully operational. Whether the thousands more promises across the ecosystem materialize will depend on whether the smaller companies now supported by Whitehall can deliver at the pace the transition requires.
