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What went wrong at BritishVolt?

The Governance > What went wrong at BritishVolt?

What went wrong at BritishVolt?

This is the story of the rise and fall of BritishVolt, and a case study of bad corporate governance.

In response to the ever-worsening and ever-present threat of the climate crisis, the UK Government in 2020 promised to ban the manufacturing and sale of new petrol and diesel cars in the UK by 2030. This flagship policy would be essential to Britain meeting its 2050 net zero goals, as transport makes up 24% of total emissions, of which 91% is produced by road vehicles, according to Government figures.

Naturally, batteries are a critical element of this electric transition – and in turn, the production of vehicles is vital to the UK economy at large. Eight hundred thousand cars and 1.6 million engines were made in the UK in 2021, of which 80% were exported, making up 10% of all exports and hundreds of thousands of jobs directly and indirectly.

To ensure the resilience of this industry while preparing for the 2030 Internal Combustion Engine (ICE) ban, domestic battery production had to ramp up – and fast. The Faraday Institute calculates that there will need to be five UK-based gigafactories by 2030, each producing 20GWh per year of batteries. There is currently just one.

The jewel in the crown
The jewel in the crown of the UK EV industry, and therefore all the future car industry, would be BritishVolt – a company founded by Swedes Orral Nadjari and Lars Carlstrom. Since its launch, it had amassed nearly $2.5 billion in promised funds – including £100 million from the government and preliminary deals to supply batteries to Aston Martin and Lotus.

The jewel has faded. The company fell into administration in late January 2023, just four years since its formation and nine months since it unveiled the Northumberland’ gigafactory’. It is worth just £32m – over 90% less than in 2022.

BritishVolt’s demise was not down to one single factor – but rather a myriad of failures in governance and leadership. Due to the centrality of batteries to the future of global decarbonisation, and Brexit tariffs making the import of batteries unsustainable, this isn’t just another story of a single company failing. The failure of BritishVolt threatens Britain’s position as the third-largest tech ecosystem and global leader in decarbonisation.

However, this was not inevitable. Across the pond, the Inflation Reduction Act exemplifies effective industrial policy. At home, the government’s stewardship of the steel industry shows it can be done here too, but it begs the question, why steel over electric batteries? Ultimately, the decision to favour steel rather than future-proof the car industry will be yet another mistake in this story.

Read more: How good governance prevents corruption

Too fast, too soon
As stated, there are many reasons for BritishVolt’s failure. The first is the timeline of events. David Bailey, professor of business economics at Birmingham Business School in the UK, commented that they “hadn’t secured all the funding needed to build out the factory for about £3.8 billion. And they didn’t have any big customers” initially.

After the company announced its costly factory, the government promised £100 million due to its alignment with the much-discussed and little-acted-upon’ levelling up’ strategy. Only after this funding was pledged did the first customers arrive – Lotus and Aston Martin, and the big investors, which through five funding rounds, invested $2.4 billion.

Lotus only sold 1,710 cars in 2021, and Aston Martin 6000. Assuming that by 2030 these will all have to be electric, we start to see why things didn’t add up. At 30 gigawatt hours, the promised factory would have been big enough to make hundreds of thousands of batteries a year.

By 2022, things weren’t looking good. The company had a £3 million a month payroll and, in October, announced it needed £200 million in emergency funding to last until the summer of 2023 when it expected to receive its first orders from vehicle manufacturers. The government rejected a request for an early helping hand of £30 million.

The two founders flew around in private jets. They spent money they didn’t have – and not just on huge factories. The company leased a £2.8 million mansion for executives to stay in while visiting the site. Each staff member was given a £900 computer monitor. Budgets were not managed like a startup looking to scale but an established, profit-generating company.

BritishVolt didn’t have the customers to promise such a project or such an expensive payroll. Poor governance was central here: lofty aims and over-ambitions aims should have been restricted from the start, which is a significant responsibility for the board.

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November 11, 2015



Skills Used

Strategic Observation, Fieldwork, Market Research

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