Agenda item

Report of the Director of Business Investment and Culture

The Cabinet Member for Strategic Finance and Resources considered a report of the Director of Business, Investment and Culture which indicated that Coventry is home to the UK Battery Industrialisation Centre (UKBIC) which formally opened for business in July 2021. UKBIC is a state of the art £130m battery research facility which works to support the UK automotive industry to develop the next generation of electric vehicle batteries.

Since the Council, its partners and the major funders of the project Innovate UK began to plan the project in 2017, the pace of change in the automotive industry has increased even more quickly than was forecast, with legislation coming into force which will ban the sale of new internal combustion engine vehicles by 2030.

The full operational phase of the plant has been delayed by the pandemic due to the global reduction in manufacturing resulting in the slippage of planned commercial contractual income for the company.  Now that the facility is up and running, UKBIC is focussing on winning orders from the automotive industry for the critical Research and Development work that it does. The demand for this work is now returning strongly such that it will be necessary for UK Battery Industrialisation Centre Ltd to secure short term funding for both the existing operational and ramp-up costs of additional staffing required and other expenses in order to support automotive manufacturers with these orders, many of which are linked to the ongoing aspirations to secure high-volume battery manufacturing in UK ‘gigafactories’.

The UK Government’s Faraday Challenge is proposing to provide the additional funding to UK Battery Industrialisation Centre Ltd for this purpose, some immediately, and further grant monies in 2022/23 and 2023/24. The timing of these expected monies is such that there will be an immediate need for cash flow support in October/November 2021. It is proposed that the Council (in its role as UK Battery Industrialisation Centre Ltd’s shareholder) provide UK Battery Industrialisation Centre with a cash flow facility of up to £500,000, which would be a secured interest bearing loan that contributes towards a total of approximately £2m required in the current financial year to continue operating, with the Faraday Challenge providing the remainder including subsequent years.

The report sought delegated authority to negotiate the detailed terms of the loan which would be made on a commercial basis. The City Council  will aim to recover all the funding it provides to UK Battery Industrialisation Centre Ltd plus interest charged at a rate that is compatible with Subsidy Control (state aid law) and will take appropriate security on the loan to cover any event of default. UK Battery Industrialisation Centre Ltd will only be able to draw down the loan once the remaining funding has been committed by Government. This is the recommended option because it provides the necessary funding for UK Battery Industrialisation Centre Ltd to match against additional cash from Government whilst enabling the Council to recover its initial funding contribution. This option will provide the backing which UK Battery Industrialisation Centre Ltd needs in order to support the city’s ambitions as a centre for the automotive industry as it turns electric post-2030 and support the Council’s ambitions to secure a gigafactory.

RESOLVED that the Cabinet Member for Strategic Finance and Resources:-

1)  Subject to the satisfactory conclusion of the due diligence in Recommendation 2 below, approves the provision of a cash flow facility by way of a secured loan to UK Battery Industrialisation Centre Ltd of up to £500,000

2)  Delegates authority to the s151 officer  in conjunction with the Director of Law and Governance,  following consultation with  the Cabinet Member for Strategic Finances and Resources and the Shadow Cabinet Member for Strategic Finance and Resources, to complete the necessary due diligence, agree terms and conditions, and to enter into the necessary legal agreements