UK chancellor to unlock financing for critical minerals supply

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Companies that import critical minerals into Britain for use by manufacturers will be able to obtain financing for the first time from UK Export Finance, Rachel Reeves will announce in the Budget on Wednesday. 

The chancellor will say that the measure is needed to help Britain in the global race to secure materials such as lithium, graphite and cobalt that are key to making products ranging from phones to electric vehicles. 

The Treasury said this would be particularly beneficial for manufacturers in industries such as defence, aerospace and making batteries for electric vehicles. Carmakers Nissan and Jaguar Land Rover-owner Tata are building battery factories in the UK, which experts say is one important step towards growing a domestic critical minerals supply chain.

The goal of shifting energy systems away from fossil fuels and towards renewable energy sources such as solar and wind will require a huge increase in the use of critical minerals. 

The UK is part of a coalition of 14 nations and the European Commission called the “Minerals Security Partnership”, which is trying to increase international collaboration and co-financing for the sector. 

The US and China have been embroiled in a trade war in which Washington has imposed export curbs on semiconductors and other advanced technologies, while Beijing has retaliated by restricting exports of some minerals. 

The tension has also spilled over into the EU, which this month said it would impose tariffs on imports of Chinese electric vehicles following months of ratcheting tensions between Brussels and Beijing.

Chinese companies control 90 per cent of the world’s processing capacity for rare earths and more than half the processing capacity for nickel, lithium and cobalt.

Jeff Townsend, founder of the Critical Minerals Association, said it was crucial that the UK develop a domestic critical minerals industry to secure long-term supply, a push that the government would need to support.

“There might be projects that don’t work [commercially without government support] but where the strategic value to having your own supply chain far outweighs that,” he said.

“You’ve got to build everything all at once,” from mines to processing and refining and battery manufacturing, he said. “We’re in a global race.”

The government said the change would make it easier for UKEF, the UK’s export credit agency, to secure finance contracts for critical mineral suppliers in countries such as Australia with large mineral deposits. 

“This addresses a gap in the UK’s existing financial support for manufacturers looking to secure these key minerals, who previously would not have been able to access government support in order to do so,” a spokesperson said. 

They added that the decision strengthened “UKEF’s world-leading export finance support”, bringing the country in line with competitors.

It comes on the back of the government’s launch of its modern industrial strategy, which will drive “long-term growth that is supportive of net zero, regional growth and economic resilience”, they said.