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2025 Spending Review and Industrial Strategy

Following the publication of its Plan for Change in 2024, nearly a year after coming to power, the Government has published its Industrial Strategy that aims to increase business investment by capturing a greater share of internationally mobile capital, which in turn will spur domestic businesses to scale up their operations, and thereby generating economic growth.

With Advanced Manufacturing comprising one of the eight highest-potential sectors targeted for growth over the next decade, the Government has announced a raft of spending aimed at the automotive industry, with Electric Vehicles (EVs) receiving a large proportion of that funding.

Support for EV manufacturing

£2.5 billion has been pledged to boost EV production through the DRIVE35 initiative; specifically the Government would like to boost high-volume EV manufacturing in the UK, which will not only increase the take up of EVs but will also create and maintain thousands of jobs in across the country.

Large scale giga-factories have also been touted to receive significant funding, with the negotiation of a trade deal with the USA set to remove the tariffs currently being levied on British cars shipped to the USA, being additional measures taken to support the UK automotive sector.

Support for EV charging

An additional £2.6 billion has been allocated to decarbonise transport in the UK over the next three years, including £800 million for EV charging being used to install approximately 80,000 charging devices across the country, as well as £1.4 billion to support the uptake of EVs, including electric vans and heavy goods vehicles (HGVs).

Support for EV sales

Clarifications around the Zero Emission Vehicle (ZEV) mandate were also published in April 2025; cars powered solely by and internal combustion engine (ICE) will no longer be able to be sold in the UK from 2030, although manufacturers will be able to sell hybrids until 2035.

Smaller but critically important British manufacturers, such as McLaren and Aston Martin, will be exempt from the ZEV mandate in an attempt to preserve some of Britain’s rich automotive heritage. ICE powered vans will be available for sale until 2035, the Government has confirmed.

However, with the sale of new EVs not yet reaching the ZEV mandate targets, the Government has recognised that additional support is required and has therefore launched the Electric Car Grant. With grants of up to £3,750 available against the cost of a qualifying EV with a recommended retail price not exceeding £37,000, the Government will make available £650 million until 2028/29 to support the take up of new EVs.

Whilst EV sales remain below the ZEV mandate target, sales are increasing significantly as manufacturers discount cars and strive to meet the target. As more and more second hand EVs now also coming to market—driven by the return of the first wave of salary sacrifice vehicles and a sharp rise in early terminations—a cohort of 30 companies has written to the Government, urging financial support due to the significantly lower residual values of EVs, which depreciate about 27% more than their ICE counterparts.

The used EV market is now four times larger than the new EV market, and, with lower residual values crystallising substantial losses within the leasing sector, it is understandable that companies are looking to the Government for help.

Other measures

The Government has also pledged significant funding for local councils around the country to adopt EVs, which includes £25 million for cross-pavement charging to help those without a driveaway adopt EVs. Kerbocharge is already working with 30 local councils and have 12,000 people on their waiting list to have cross-pavement charging installed.

To support the transition of road freight and public transport, there is also a further £30 million allocated for depot charging which will support HGVs, vans and coaches; and 200 NHS sites will receive some of the £8 million funding to be made available to support the adoption of electric ambulances.

Finally, with 56% of drivers wishing to have more signs for charging, especially on motorways which will help route planning, the Government has also agreed to fund more signs through local councils.