UK secures £1 billion investment for Sunderland gigafactory, expanding EV manufacturing - Trade Treasury Payments

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UK secures £1 billion investment for Sunderland gigafactory, expanding EV manufacturing

A £1 billion investment in a new gigafactory in Sunderland in support of the UK’s electric vehicle (EV) supply chain has been confirmed. The facility, to be developed by Japanese battery manufacturer AESC, is expected to create 1,000 skilled jobs and boost domestic battery production capacity sixfold, enough to support up to 100,000 EVs annually.

The announcement follows a newly signed UK-US trade agreement that reduces export tariffs on British-built vehicles, offering additional commercial upside for the UK’s automotive sector.

The deal is underpinned by a blended financing structure combining public-sector guarantees with commercial bank lending and private investment. UK Export Finance (UKEF) and the National Wealth Fund (NWF) are providing guarantees that unlock £680 million in debt financing from a syndicate of banks, including HSBC, Standard Chartered, SMBC Group, Societe Generale, and BBVA. AESC has secured the remaining £320 million through a mix of equity and private financing.

In parallel, the UK Government’s Automotive Transformation Fund will provide £150 million in grant funding to support project delivery.

The Sunderland project is the latest in a series of government-backed investments aimed at strengthening the UK’s advanced manufacturing capabilities. It aligns with broader objectives under the Government’s “Plan for Change”, which emphasises industrial revitalisation, clean energy competitiveness, and the creation of high-quality employment.

Rachel Reeves, the UK’s Chancellor of the Exchequer, said, “We are going further and faster to boost our industries’ resilience and encourage their growth as part of our Plan for Change, and this investment follows hot on the heels of yesterday’s landmark economic deal with the US which will save thousands of jobs in the industry.”

UKEF CEO, Tim Reid, said, “This hugely exciting project is a prime example of how export financing is a powerful tool for unlocking growth opportunities for British exporters and strengthening local economies. We’re proud to join forces with partners to back this pioneering gigafactory that will help cement the UK’s prowess as an EV battery-making force for years to come.”

UK Business and Trade Secretary Jonathan Reynolds, said, “We’re backing our world-class car industry, and this investment is yet another vote of confidence in the North East’s thriving auto manufacturing hub which will secure a thousand well-paid jobs and boost prosperity across the region.”

To date, funding programmes such as the Automotive Transformation Fund and the Advanced Propulsion Centre have facilitated over £6 billion in private investment. The government has also earmarked over £2 billion for zero-emission vehicle development and related R&D over the next five years.

Construction is expected to begin in the near term, with operational rollout anticipated over the coming years. Once complete, the facility will represent a material increase in the UK’s EV manufacturing capacity and a key building block in the country’s net zero strategy.

The announcement follows a UK-US trade agreement signed earlier this week that reduces tariffs on UK-built car exports from 27.5% to 10%, a change applying to a quota of 100,000 vehicles, roughly equal to the UK’s total exports to the US last year. The revised tariff framework is expected to generate cost savings in the hundreds of millions for British automakers. While good news for the UK, the automotive aspects of US-UK trade deal drew ire from the American Automakers who were disappointed that the US administration prioritised a deal with the UK over a deal with Canada and Mexico.

American Automotive Policy Council President Matt Blunt said, “The US automotive industry is highly integrated with Canada and Mexico; the same is not true for the US and UK. We are disappointed that the administration prioritised the UK ahead of our North American partners. Under this deal, it will now be cheaper to import a UK vehicle with very little US content than a USMCA-compliant vehicle from Mexico or Canada that is half American parts. This hurts American automakers, suppliers, and auto workers.”