Start-up of UK batteries Britishvolt may run out of funds and enter administration after the government rejected a £30 million funding advance.
The company intends to construct a factory in Blyth, Northumberland, to manufacture batteries for electric vehicles.
The government, which had pushed for the project, had committed £100 million to Britishvolt.
According to reports, the firm wanted to withdraw nearly a third of the funding early, but the government refused.
It has cast doubt on the £3.8 billion project, which has already been delayed several times.
Britishvolt has struggled to find investors to help fund the construction of its 3,000-job Giga factory in Blyth.
Ministers hailed it as an example of “levelling up,” a Conservative goal of investing in communities to reduce economic imbalances with the rest of the country.
Blyth made electoral history in 2019 when it switched from the Labour Party to the Conservatives.
The firm, which has yet to generate revenue, has held urgent talks in recent months to secure new funds to stay afloat.
According to a spokesperson for Britishvolt, the company is “aware of market speculation” and is “actively working on several potential scenarios that provide the required stability.”
The Labour MP for Wansbeck, where the site is located, Ian Lavery, told the media that they spoke with the chairman of Britishvolt on Monday, who said the company had asked the government for £30 million to continue the project.
“The chairman informs me that the government has responded overnight [with] Grant Shapps, the new Business Secretary, saying that they are not prepared to do that, and as a result, Britishvolt is very likely to go into administration,” he said.
Mr Lavery continued: “It is squarely at the government’s door for not agreeing to bring forward funds to ensure this project’s continuation. It’s completely ridiculous – what happened to leveling up?”
As we transition to electric vehicles, the government is “determined to ensure that the UK remains one of the best locations in the world for automotive manufacturing, while ensuring taxpayer money is used responsibly and provides best-value,” according to the Department for Business, Energy, and Industrial Strategy.
According to a spokesperson, the government will not comment on “speculation or the commercial affairs of private companies.”
The government pledged £100 million to Britishvolt in January to help it build its battery plant and attract more private investment in the development.
Former Prime Minister Boris Johnson praised the investment at the time, calling it a “leveling up opportunity” that would bring “thousands of new highly skilled jobs to communities in our industrial heartlands.”
The factory and the jobs it was expected to create, according to then-Business Secretary Kwasi Kwarteng, were “exactly what leveling up looks like.”
However, Britishvolt was recently forced to postpone the plant’s start-up for a second time. It was supposed to start by the end of next year, but that was pushed back to the end of 2024.
The company then announced in August that it would be delayed again until the middle of 2025.
The firm blamed “difficult external economic headwinds such as rampant inflation and rising interest rates” at the time.
The initial promise of government funding had assisted Britishvolt in raising an additional £1.7 billion from private investors. Abrdn, a UK asset investment firm, and Tritax, a fund manager, were among them.
From 2030, new petrol and diesel car sales in the UK will be prohibited, and manufacturers will be transitioning to producing electric vehicles, which necessitates an increase in battery production.
Britishvolt had already signed memorandums of understanding to manufacture batteries for Aston Martin and Lotus, both of which are based in the United Kingdom.