Government must resist saving poorly run businesses, urges IEA expert

From: Think Tanks
Published: Fri Jan 20 2023

Andy Mayer, Energy Analyst at free market think tank the Institute of Economic Affairs, commented on the collapse of Britishvolt

Britishvolt (BV) was a poorly run business that failed despite Government support and political assumptions about the future of transport.

BV's necessity was rooted in two assumptions. That the UK's past success in making cars must be continued, and that heavy batteries must be made close to car plants to reduce their cost and impact.

The UK's current advantage lies in manufacturing engines, specifically the internal combustion engines that use fossil fuels, particularly in luxury vehicles. The Government has signalled it will ban this industry in two stages: 2030 for dedicated engines, and 2035 for hybrids.

Whether location matters rests on the difference in cost and social costs attached to transport. It clearly doesn't matter for example for the manufacture of most consumer goods, made in Asia.

These countries also dominate the global market for making batteries, while the leading UK site is Chinese. The UK is expensive for land, labour, and energy, all three major costs for manufacturing. Current UK policies artificially raise the cost of land through planning, seek to make the UK a high-wage' economy, and force up the price of energy.

In brief the UK seeks to ban the thing it leads the world in producing and is throwing money at poor quality projects. The UK has done little to nothing to reduce the cost of making things in the UK. Industrial strategy and subsidies will make that problem worse, by imposing their cost on other industries, and creating an investment climate where no one will act without the promise of support.

The alternative is letting world-beating companies emerge by proof of their own efforts and trade. This requires low stable taxes, pro-growth regulation, and the courage to resist intervention.

Company: Think Tanks

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