Britishvolt Thrown a Lifeline in Struggle for Survival
The UK battery manufacturer Britishvolt has been saved from bankruptcy after receiving a short-term financing package from one of its early backers, Glencore. This will enable it to "bridge over the coming weeks", as mentioned in a press release. The firm has already delayed large-scale battery production at its Blyth site to 2025, and now faces major uncertainty concerning its long-term prospects.
The worst-case scenario for Britishvolt would be a formal bankruptcy before Christmas, after failing to secure further long-term investment. This would likely result in job losses for the 300 current employees and an auctioning of their highly regarded Blyth production site. Unsecured creditors to the firm would have their investment virtually wiped out.
The electric battery company InoBat has already approached Britishvolt’s appointed administrator to express their interest in the site. This could be seen as a major blow to the security of the UK’s EV supply chain, as domestic demand for lithium-ion batteries is set to significantly outstrip supply and impede the UK government’s net-zero targets.
A more realistic outcome would be Britishvolt raising funds from further substantial equity financing. Given the firm’s glaring issue of no firm orders for its products, shareholders may have to compromise on valuation. The process would likely involve much negotiation as the battery makers' valuation has already been cut by £200m this year to $1.5bn, as reported by the FT. Notably, still, only £1.7bn of financing for its £3.8bn flagship mega-factory has been raised.
There is also the possibility of a buyer acquiring a majority stake in the firm. Although a riskier strategy than purchasing the assets of the firm alone, this would allow potential acquirers to continue the current mega-factory production with more ease and continue valuable partnerships with Aston Martin, Lotus and Scorpio Group. An acquisition would also mean ownership of German battery producer EAS, which could offer synergies to businesses in the same line of work.
Britishvolt regards itself as ‘strategically important for the UK automotive industry, and this claim has been strongly supported by a pledged investment from the UK Government, which is rumoured to amount to £100mm. The Faraday Institution estimates demand for UK batteries will amount to 100GWh by 2030 while supply will reach 57GWh. This assumes the success of Britishvolt’s proposed production and highlights the firm's importance. The promise of the creation of 3,000 jobs in a relatively deprived area would have also had significant sway to secure the funding.
We may be in a pivotal decade for UK vehicle manufacturing. The ban on new petrol/diesel vehicles comes into force in 2030. Ex-JLR boss Ralph Speth warned ‘if batteries go out of the UK, then also the automotive production will go out of the UK’. Motor vehicles remain a critical UK export, worth £42.4bn in 2019.
Therefore, it is clear that Britishvolt would not be thought of as just another failed start-up. What happens, in this case, could set investors' appetites for similar investments in the UK and have repercussions on the future of a core UK industry.