Due to additional subsidies offered there, the CEO of a significant UK manufacturing company told the BBC that he is thinking about shifting investment to the US or Europe.
Unipart CEO John Neill said he wanted to invest in the country but that UK businesses could not “compete on a level playing field”.
Through loans and tax concessions, the US is investing billions of dollars to promote manufacturers of electric vehicles, green energy, and microchips.
Soon, Europe might provide competing subsidies.
Chancellor Jeremy Hunt told the BBC that he would wait to make any choices until he saw what the EU did, therefore the UK has not yet revealed its plan.
Unipart is an Oxford-based company that manufactures car parts and components and handles supply chain logistics.
America’s Inflation Reduction Act (IRA), approved last year, is offering businesses a “completely game-changing set of incentives and fiscal support,” according to Mr. Neill, who also serves as a prominent board member of the SMMT, the trade group for the automotive industry.
He stated, “I’ve asked our team to closely consider our investment strategy in the US and our US enterprises and whether we should be pivoting more into those markets and perhaps even into our European companies.
With the caveat that grantees must produce their products domestically, the law will provide hundreds of billions of dollars in grants, loans, tax incentives, and subsidies to stimulate the manufacturing of items like electric automobiles and green energy.
It is in line with comparable financing commitments made in the US Infrastructure Bill and its Chips Act, which aims to increase investment and increase domestic manufacture of crucial microchips.
The US laws aim to lessen America’s reliance on China for important strategic technologies, as well as to address supply chain issues that arose during the pandemic.
But among US allies like the European Union, which is preparing its own subsidies in response, Korea, Japan, and the UK, they have sparked worries about protectionism.
“No one anticipated that Americans would alter the norms to the degree that they have; it simply seemed quite un-American. However, Mr. Neill informed the BBC that they have.
“In order for us to invest, we must comprehend Britain’s plan and the future of our regulatory system. And none of that is evident to us.
Other prominent UK business leaders have cautioned that if the UK does not respond, it runs the risk of “standing on the sidelines” and losing important manufacturing investments.
The whole UK automobile industry, according to the former Aston Martin CEO, is in danger.
Due to US investments, thousands of projects are already under development across America, particularly in the “Rust Belt”‘s former coal-mining regions, which include states like Pennsylvania, West Virginia, Kentucky, and Michigan.
The firm Ascend metals was the subject of a BBC visit last week. Ascend Elements is building the first phase of a $1 billion facility in Western Kentucky to collect important rare earth metals from used batteries. The project has received backing of $500 million from the US government.
After being nearly entirely imported from China, key components for an electric vehicle battery will now be produced in the US.
According to CEO Mike O’Kronley, “What it’s done is accelerated the US’s ability to be self-reliant, to make these battery materials on their own.”
He continued by saying that the US had surpassed Europe, which had been anticipated to be the second-largest market for the production of batteries.
“If the UK is going to compete with what’s happening here in the US, a similar level of incentives or favourable legislative environment or framework needs to be put in place,” Mr. O’Kronley said.
“That hasn’t happened yet, but it could happen,”
While there is a place for some subsidies, according to Chancellor Jeremy Hunt, “to some extent, what America is doing is playing catch up with the UK and other European countries,” he said in an interview with the BBC.
“And we believe that relying solely on subsidies over the long term runs the risk of being wasteful because you spend money on projects that would have happened anyhow.”
When it is evident what the European Union will do, the government has stated that it will react to the US actions. A British equivalent of the Inflation Reduction Act has been promised by Labour, although the amount of financing has not been specified.
UK businesses are concerned that the EU is already working to counteract the US, with Spain hastening a round of significant subsidies for the production of batteries and electric vehicles.
The owners of Jaguar Land Rover, India’s Tata Group, have expressed interest in the matter and are presently debating whether to erect a “gigafactory” in the UK. Decisions will be taken in the upcoming weeks.
