The UK is increasingly confident of protecting the JLR battery factory

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British ministers are increasingly confident of persuading Tata Motors to build a flagship battery factory in the UK, dangling a last-minute offer of increased energy subsidies to secure a deal.

Rishi Sunak’s government has offered a series of incentives worth hundreds of millions of pounds to get the company to build a battery site in Britain rather than Spain to supply Jaguar Land Rover’s electric cars.

But British officials believe the key will be big discounts on the huge amounts of energy needed to run a gigafactory, which would be built in Somerset, as well as the separate Tata Steel operation in Port Talbot.

A decision on Tata’s battery plant is imminent, according to people familiar with the discussions. One said a decision could come as early as next week.

The company has asked for £500 million financial assistance from the UK and heavily favored the Spanish site earlier in the year despite its historic links to the UK.

But a recent push led by Sunak has convinced JLR’s Indian owners to build its plant at Bridgwater, with British officials saying a better offer on energy prices had been made.

“The situation has recovered,” a minister said. “It may still be in the UK.”

The deal was seen as a must by the government to prop up the UK’s shaky car industry fights After Brexit move towards the production of electric cars on a large scale.

Britain’s high energy prices relative to EU rivals have been the big sticking point and ministers are looking to boost subsidies to big energy consumers like Tata through a new ‘British Energy Supercharger’ scheme.

A consultation is underway on the scheme that would cut the energy bills of 300 energy-intensive companies, such as those that make steel and batteries. The new regime will be introduced from spring 2024.

Kemi Badenoch, energy secretary, led talks with Tata on the new supercharging scheme; his design will have a crucial impact on the viability of both the proposed gigafactory and the Port Talbot Steel Works.

The cost of energy subsidies for heavy industry will eventually be financed through consumer bills. The total grant to Tata to build the gigafactory will depend on the generosity of the scheme.

UK also offers one-off grant to Tata to build its billion-pound battery factory automobile transformation fundalong with another grant to improve road links to the proposed site close to the M5 motorway.

Those close to the deal say the UK and Spain’s bids to build the battery factory are broadly similar, but the long-term cost of energy could be the deciding factor.

“The key sticking point is not the cost of construction, we need to break even on that, it’s just the operating costs and the high cost of energy in the UK compared to other markets,” said one person briefed on the discussions.

The idea of ​​linking a subsidy package for Tata’s battery factory and its Port Talbot steel mills was agreed by Liz Truss during her short-lived premiership last year, in talks with Natarajan Chandrasekaran, chairman of parent company Tata Sons.

Tata Steel is expected to receive £300m to decarbonise its Port Talbot works, a sum also going to British Steel for its Scunthorpe works, according to government sources.

Spain has been trying to woo Tata with the promise of access to some of the billions of euros in EU grants and loans the country is receiving from the bloc’s post-Covid recovery funds.

Aimed in part to accelerate the transition to cleaner energy, €3 billion of Next Generation EU funds have already been allocated by Spain to electric vehicle projects. Tata considered an industrial site in Aragon, in the north-east of the country.

Analysis by industry trade body UK Steel this year found that steelmakers were still paying 60% more for their electricity than German producers, despite falling wholesale prices.

JLR is due to release an all-electric Range Rover next year and a suite of seven battery-powered cars as part of a £15bn electrification programme, as it aims to catch up with premium rivals such as Mercedes-Benz and BMW.

The battery plant is expected to be built alongside China’s Envision, the same company that supplies Nissan with batteries for electric cars in Sunderland.

Tata declined to comment.

Additional reporting by Chloe Cornish in Mumbai