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The UK government has committed £4.5bn in funding for strategic manufacturing, as it seeks to lure more production to its shores in the face of fierce global competition.

The Advanced Manufacturing Plan, unveiled during the Autumn Statement by Kemi Badenoch, the UK’s business and trade secretary, aims to ensure the UK is the “best place in the world” to start and grow a manufacturing business through targeted funding for the automotive, aerospace, clean energy and life sciences sectors.

“Supply chains and technology are increasingly globally contested. But we won’t be drawn into a distortive subsidy battle,” the government’s plan document says. “Our advanced manufacturing strengths are supported by a strong business environment, a world-class network of universities and innovation institutions, and a highly skilled workforce. We will build from these existing strengths to attract investment as we enter major investment cycles in clean and digital manufacturing technologies.”

With the funding, which will be made available for five years from 2025 – following the country’s next general election – the government says it will de-risk and incentivise private sector investment, asserting that for every £1 it puts into the future of manufacturing, it will leverage £5 of additional outlay from the private sector.

“We are going full throttle to back British businesses and make the UK a world leader in manufacturing, which already makes up over 43% of all our exports and employs 2.6 million people across the country,” said UK Prime Minister Rishi Sunak as the plan was announced. “Today’s plan will not only give the industry the long-term certainty they need to grow and invest further in the UK, but it will also lay the foundations to create more jobs and opportunities for people across the country.”

Of the money earmarked by the government, the lion’s share – over £2bn – will go to the automotive sector, which exports 80% of the vehicles it produces and accounted for £34.4bn in exports last year, according to figures from the Society of Motor Manufacturers and Traders (SMMT), a UK industry body.

The money will largely be spent on ramping up the production of battery electric vehicles (BEVs), which currently make up less than 10% of UK-built cars. This is in response to incoming zero-emission vehicle legislation in both the UK and its most important export markets, which will place limits on the percentage of internal combustion engine vehicles a manufacturer is allowed to sell.

Currently, the UK is almost entirely reliant on imports to meet demand for both the batteries used in BEVs as well as their components. In June last year, the country launched its Critical Minerals Strategy in a bid to secure the supply of materials like lithium, cobalt and graphite that are used in battery production – a plan in line with those laid out by other major global economies such as the US, European Union and Australia.

To address the downstream battery supply chain, the government has now introduced the UK Battery Strategy. Set up under the automotive section of the wider manufacturing plan, the strategy’s stated aim is for the UK to have a “globally competitive battery supply chain that supports economic prosperity and the net zero transition”.

Industry leaders have responded positively to the government’s initiatives. Mike Hawes, chief executive of the SMMT, says they “can only help” to attract the investment necessary to seize growth opportunities.

“Decarbonising road transport is essential if net zero is to be achieved, and that transition must be ‘built in Britain’,” he says. “The government’s Advanced Manufacturing Plan sets out measures to support the UK automotive supply chain as it undergoes the most significant transition in its history. The plan, together with a new battery strategy to support the development and production of this critical technology, is essential if the UK is to compete.”

Among concrete commitments, the government says it will provide support for large-scale, long-term research and innovation activities, from early to late stages, across applications and key areas of the battery supply chain. Investments include £38mn for the UK Battery Industrialisation Centre in Warwickshire, which was established in 2021, and £12mn to set up the Advanced Materials Battery Industrialisation Centre, which is planned to sit across two sites in County Durham and Coventry.

However, the extent to which the UK’s battery plan will make a measurable difference remains to be seen. International competition is significant, particularly given the US’ plans to become a cleantech superpower with US$369bn of subsidies under the Inflation Reduction Act, and the EU’s recently introduced Green Deal Industrial Plan.

The UK government is keenly aware of this fact. Writing in the Financial Times in July, Badenoch referred to “a battle of wits competing with countries prepared to offer eye-watering sums to pry business away from our shores”, adding that some nations have gone on “colossal spending sprees” to claim a share of battery manufacturing.

Nonetheless, while the UK’s pockets may not be as deep as those of other countries, it has already landed several investments from major global players. These include Japanese automaker Nissan, which last week said it would spend £2bn to build three electric car models at its Sunderland factory, Jaguar Land Rover, which is investing £15bn over five years to produce electric vehicles, and Indian automotive giant Tata, which is building a £4bn gigafactory for battery production.

“Capitalising on competitive strengths requires a combination of clarity and stability on the regulatory environment to build business confidence and a comprehensive and competitive set of incentives to encourage investment,” says John Foster, chief policy and campaigns officer at the Confederation of British Industry, a lobbying organisation representing 190,000 businesses.

“With other countries increasingly upping the stakes, firms will hope this is the start of an acceleration in the government’s ambitions, particularly around net zero. By continuing to focus on where it can outsmart rather than outspend its competitors, the UK can make a compelling case for capturing those global growth opportunities.”