In a subsidy race Britain will never be able to outspend America or the European Union—and nor should it try. Instead, the government should focus on stability
countries have much deeper pockets and are digging into them, what is a government to do? That is the question facing Britain as it mulls what its industrial strategy should be. A good way to think about the answer is to look at the country’s automotive industry.
Carmaking in Britain has long enjoyed ups and endured downs. But the down it faces now is graver than any in decades. The shift from internal-combustion engines to electric vehicles is prompting an overhaul of the industry, which will spend about $1.2trn on electrification globally by 2030. Carmakers need new supply chains and new skills. Above all, they need batteries—lots of them, ideally within easy reach of assembly plants.
Across Europe, more than 40 of these facilities are being built or planned. Barely any of them are in Britain. One is being set up in Sunderland by Nissan and Envision, a Chinese firm: it will start production in 2025. Britishvolt, a startup with lots of champions but no customers, collapsed earlier this month. Some manufacturers are already voting with their feet:Other governments are happily splurging to encourage electric-vehicle manufacturing.
In a subsidy race Britain will never be able to outspend America or the European Union—nor should it try. If the government wants to help British industry, it should focus on its most basic responsibility, to provide a stable, well-run environment in which the private sector can flourish. And here Britain can do so much better, for its automotive industry and for others, without spending anything at all on subsidies.
The real problem for British carmakers is that the country has become a less attractive manufacturing base at just the moment when investment is needed. Britain’s carmakers export 80% of their output, more than half of it to theBrexit has already made seamless access to European markets more difficult. And at the end of this year rules on how much of an electric vehicle’s parts have to be made in either Britain or theto qualify for tariff-free trade with Europe will start to tighten.
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