Chancellor of the Exchequer Jeremy Hunt is weighing the top-up to Britain’s Automotive Transformation Fund as part of the fiscal package he’s due to unveil in next month’s Autumn Statement, according to the people, who requested anonymity discussing plans that aren’t yet concrete. 

The extra funding is needed because the government in recent months has paid out substantial amounts to persuade Tata Group’s Jaguar Land Rover to build a £4-billion (R94-billion) battery factory in Britain, and to support BMW AG’s £600-million plan to make electric Minis, the people said. 

With his fiscal headroom squeezed to a record low, Hunt is trying to find ways to boost the economy while keeping a tight lid on inflation that in recent months has started to come down from a four-decade high. He’s also under pressure to respond to Biden’s Inflation Reduction Act, a $369-billion (R7.158-trillion) package of green incentives that left British politicians and businesses concerned it would lure investment away from the UK.

The Treasury wouldn’t fund the support through extra borrowing, and is likely to allow the Department for Business and Trade to plug the fund with unspent money from other investment pots, a person familiar said. No decisions have yet been taken, they said.

The £850-million ATF is administered by the Advanced Propulsion Centre with the goal of establishing a competitive UK supply chain for the electric car industry. Of that, £136-million was re-directed toward the Sizewell C nuclear plant. People familiar have said that the government forked out £500-million for the Tata plan and funneled £75-million to BMW. Those payouts exhausted the fund, one of the people said.

The Business Department is now pushing for several hundred million pounds to be added to the fund as part of an Advanced Manufacturing Plan to be unveiled this fall in order to continue attracting business investment, two people said. 

“Maintaining a competitive business environment to stimulate growth and productivity is critical to the future of UK manufacturing,” the department said in a statement. “We will take decisive action to ensure future investment in zero emission vehicle manufacturing.”

The Treasury didn’t immediately respond to a request for comment.

A funding boost would allow the UK to continue subsidising business investment in areas like battery and electric motor manufacturing, which are essential to Prime Minister Rishi Sunak’s pledge to grow the British economy as well as UK efforts to reach so-called net zero emissions by 2050. Sunak recently watered down efforts to get there, including pushing back a ban on the sale of new petrol-and diesel-fueled vehicles to 2035 from 2030.

Hunt said in May that the government was considering how it will respond to Biden’s green package and provide an update by the fall. Business Secretary Kemi Badenoch is also preparing to announce a manufacturing strategy designed to reduce regulation and boost supply chains.

In addition to helping facilitate investments by Tata and BMW, the ATF played a role in Nissan Motor Co. and battery manufacturer Envision AESC committing two years ago to plough £1-billion into an EV-making hub in Sunderland, which is already home to the UK’s biggest car plant.

Japan’s largest automaker also has hinted recently at the possibility of making an electric model in the UK. Last month, Toyota Motor Corp. revealed a prototype of a hydrogen fuel cell Hilux pickup in Burnaston, and said it will decide on whether to produce the product in the second half of the decade.