In a surprise announcement this week, BMW reported that it had reversed its decision to move production of the electric version of the Mini to China. Instead, the company has committed to spending £600m to upgrade its factory in Oxford. The German carmaker will manufacture the new models in the UK from 2026.
The U-turn, which is being described as securing 4,000 jobs at Oxford and Swindon, where BMW makes body panels, was made much of by government ministers, including the chancellor, Jeremy Hunt, who said BMW’s investment was “a huge vote of confidence in this country as a global leader in electric vehicles”.
Whilst the decision must be a huge relief for the people working at BMW, who have had the sword of Damocles hanging over their heads for a year, having been told the work was going to be relocated to China, it is a considerable stretch to say that it is a huge vote of confidence in this country.
Retaining the manufacture of the Mini, an iconic British brand, in the UK has not been without difficulties, nor without cost to the taxpayer. The decision was only made after the UK government agreed to give BMW an estimated £75m in subsidies as a sweetener to stop it from carrying out its decision to move the whole production to China.
The fact that the government has been forced to contribute such excessive sums to a global company making a total profit of €23.2 billion in 2020, shows the influence that these companies hold over the UK economy. It is also evidence that Britain, far from being the manufacturing country of choice, is only able to keep even a semblance of a manufacturing base by offering huge bribes to companies to continue operating in the UK. It is difficult to accept that one of the most callous conservative governments of all time has suddenly started showing some concern for people’s livelihoods.
There is no doubt car manufacturing across the world is in a state of flux. The phasing out of petrol and diesel cars has meant that plants have had to be restructured to cope with the design and manufacture of electric replacements. Manufacturers are in the middle of long term strategic planning to assess the best options for their companies and they have no sentimental attachment to their workers. Profit and sustainability are the only drivers.
The companies know that they have the UK over a barrel. Brexit has caused problems not being experienced elsewhere. The car manufacturers say the heart of the problem is the trade and cooperation agreement (TCA) between London and Brussels. It includes “rules of origin” so that 40% of an electric vehicle’s parts have to originate in the UK or EU in order for it to qualify for trade without tariffs. Most batteries come from China, so it’s a struggle to satisfy the rules. When the threshold rises to 45% next year, and 55% in 2027, the car makers say it will be impossible to operate in the UK with these constraints.
It is not a surprise that electric cars need batteries, and, having signed the Trade and Cooperation Agreement, the government should have been aware that the whole of the UK car industry would be at risk without looking to invest in new factories to produce these essential components.
Despite the UK having a head start, only three of the 41 projects to build new factories are in the UK. The Japanese company, Automotive Energy Supply Corporation (AESC), bought by the Chinese conglomerate Envision in 2018, had a plant in Sunderland that has been producing batteries since December 2012, when it was opened by Nissan and partners to produce cells to power its pioneering Leaf electric car. Britishvolt, a startup factory that was lauded as the British option and was again strongly supported by the Government to the tune of huge, but unknown, sums of money, has gone into liquidation.
The third project is with Tata Son’s proposal to build one of Europe’s largest battery cell manufacturing sites, possibly in Somerset, where the government clearly felt it was playing catch up with its European neighbours and hence negotiating with a gun to its head. It is thought the inducement to Tata was in excess of £500 million but, again, this is an estimate. Tata is doing particularly well out of the UK, as Tata Steel is also reportedly close to securing £500 million to build electric arc furnaces to reduce carbon emissions at Port Talbot steel works. The downside is that this could potentially result in the loss of thousands of jobs in the area.
So decisions that could potentially result in a devastating impact on the UK economy remain shrouded in secrecy. Granting large sums of public money to multinational corporations without public or parliamentary scrutiny raises serious questions about their legality, accountability, and effectiveness.
It is difficult to understand how they have been allowed to get away with it. It is certainly not the trade unions that are holding this country to ransom.