The Landmark UK Gigafactory Commission report calls for urgent action to secure battery manufacturing investment and security of supply chain in the UK. The Commission's recommendations signal opportunities and highlight challenges ahead for business in the UK automotive and energy sectors.
A Critical Juncture for UK Battery Manufacturing
The report published on 21 January 2026 highlights an urgent need for coordinated action to secure the future of the UK's automotive and battery manufacturing sectors. With global competition intensifying and the UK's share of European battery capacity at risk, the Commission calls for a step change in government strategy to attract investment, close supply chain gaps, and ensure long-term competitiveness. The Commission recommends minister-led deal-making to attract a major global OEM, accelerate at least one new gigafactory, and build domestic cathode and anode active material capacity, supported by energy cost relief, site readiness, skills, and calibrated regulatory reforms.
Key Findings and Strategic Imperatives
The UK automotive sector is a key area of the domestic economy, employing more than 800,000 people and contributing £22 billion in value-added output (accounting for c.12% of UK exports). The sector faces significant challenges. Production has declined by more than a third over the past decade, with investment shifting to countries offering cheaper energy (UK Energy Intensive Industries paid around double the EU average electricity price in 2024), faster permitting, and larger incentives. Without accelerated investment in gigafactories and supply chains, the UK risks further erosion of its automotive base and increased reliance on imports which exposes the sector to looming tariff risks under tightening UK-EU Rules of Origin ("RoO") from 2027 if battery supply chains remain import-dependent.
The Commission's analysis highlights that UK battery demand could exceed 100 GWh by the early 2030s, yet only two major gigafactories are currently confirmed (AESC Sunderland and Agratas Somerset), creating a material supply gap unless at least one additional large-scale plant is announced by end-2026 and delivered with OEM offtake, competitive energy, grid and shovel-ready sites.
The report identifies three principal objectives: (1) attracting a major global automotive OEM to anchor new gigafactory investment; (2) accelerating the development of additional gigafactories; and (3) building domestic capability in cathode and anode active material manufacturing ("CAM/AAM") to comply with tightening post-2027 Rules of Origin ("RoO") requirements.
To deliver on these objectives, the Commission sets out ten priority recommendations that together form a comprehensive strategy for government and industry:
- Attract a major global OEM as an anchor for new gigafactories.
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Accelerate gigafactory delivery with a competitive benchmarked offer to the sector.
Case by case package (grants, low cost finance or selective equity via the National Wealth Fund/UKIB/ATF), coupled with pre-permitted, grid ready sites; tripartite deals should align an OEM (demand), a cell maker (operator) and CAM/AAM producers to strengthen supply chain economics.
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Build domestic CAM/AAM capacity and support battery recycling.
Aligning precursor refining with the UK's Vision 2035: Critical Minerals Strategy and boosting recycling inputs and recovery technologies to support a more resilient supply chain.
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Establish central government leadership with a Cabinet-level minister accountable for delivery.
Driving inward investment with support from public authorities to convene government departments, resolve bottlenecks (such as grid connections or planning delays).
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Reduce energy costs for manufacturers to align with EU peers.
Increasing relief for energy-intensive industries but also embedding this support as a predictable, long-term feature of the UK's industrial offer, providing manufacturers confidence in their operating costs and close the competitiveness gap with European peers.
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Reform the ZEV mandate to better match market demand and EU targets.
Recalibrating the EV mandate to better align with EU timelines and market realities (i.e. resetting 2030 requirement to c.50–60% EV uptake and retain 2035 phase out of the internal combustion engine), shift from penalties to demand side incentives (i.e. fleets, VAT parity for home/public charging) and allow hybrids to 2035.
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Address Rules of Origin challenges by negotiating a phased transition.
Negotiate a deferral or phased transition of 2027 thresholds, providing the industry with more time to build up domestic supply chains, avoid sudden cost shocks and cliff edge tariffs while UK/EU CAM/AAM capacity scales, and clarify CAM rules for UK OEMs.
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Support innovation scale-up for next-generation battery technologies.
Targeted funding and support for UKBIC/AMBIC pilot lines, demonstration facilities, and partnerships between research bodies and industry (£452m Battery Innovation Programme), helping next-generation chemistries (such as solid-state, lithium-sulphur, sodium-ion batteries) move from lab to market.
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Expand shovel-ready strategic sites with grid and infrastructure in place.
Pre-secured planning, grid, water, and transport connections by expanding the Strategic Sites Accelerator and NSIP fast-track, shift grid connections to "first ready, first connected". This reduces project risk and accelerates timelines.
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Develop a skilled workforce through national campaigns and curriculum reform.
Develop sector-specific apprenticeships ("Destination Batteries" campaign) and facilitate rapid reskilling from adjacent industries. Early engagement with local training providers and industry-led programmes will be essential to ensure workforce readiness aligns with investment timelines.
International Engagement
The Commission advocates "conditional collaboration" with Chinese and other Asian EV/battery leaders, maintaining a cautious approach to investment and joint ventures while relying on the UK's NSI Act for case-by-case safeguards, supply chain traceability and mandated UK localisation. Improving NSI clarity and timeliness will also help to avoid chilling credible proposals.
With EU tariffs constraining some Asian manufacturers, the UK can position itself as a bridgehead into Europe, and given the UK's lower tariff than the EU on exports to the US and US restrictions on Chinese made cells, this offers a compliant route for Asian manufacturers serving transatlantic demand, subject to robust conditions on UK production, ESG traceability and use of UK supply chains.
The Path Forward
Our clients operating in or supplying the UK automotive, battery, or energy sectors should closely monitor the evolving policy landscape and government interventions. Key implications include:
- Investment Opportunities and Incentives: Companies considering UK expansion or new projects may benefit from enhanced government incentives, streamlined permitting, and support for site readiness. Early discussions with policymakers could position businesses to take advantage of these opportunities;
- Supply Chain Localisation: Firms reliant on imported battery components or materials should assess the impact of new domestic supply chain initiatives and consider partnerships or investments in UK-based CAM/AAM and recycling facilities to ensure compliance with future RoO requirements and to mitigate tariff risks on exports to the EU;
- Energy Costs and Site Selection: Energy-intensive manufacturers should review their cost structures and explore potential relief schemes or site options that benefit from government-backed infrastructure and grid connections;
- Regulatory Compliance: Automotive OEMs and suppliers must track changes to the ZEV mandate and RoO deadlines, as these will directly affect model allocation, production planning, and export strategies. Proactive compliance planning will be essential to avoid penalties or loss of market access; and
- Workforce and Innovation: Companies should consider collaborating with skills initiatives and research programmes to secure talent and remain competitive as the sector transitions to next-generation battery technologies.
The UK has a narrow window to secure its place in the global battery race. Decisive, interventionist action is required to attract a global OEM, accelerate gigafactory projects, and build a resilient supply chain. Clients should be prepared to push for more intervention and support from government and should engage early to shape and respond to the needs of the sector.
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This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.
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