A multibillion-pound funding package for key manufacturing sectors will drive growth and boost investment in the UK, ministers have said.

Business Secretary Kemi Badenoch said the UK would not be drawn into a “distortive subsidy battle” as the government set out its plan to boost key sectors and nurture a “globally competitive” battery supply chain over the next decade.

Car makers, aerospace companies and clean energy firms are set to benefit from a £4.5bn government fund earmarked for “strategic” manufacturing sectors, under the government’s Advanced Manufacturing Plan.

The plan has been published alongside a £50m battery strategy, which will see the UK aim to become a world leader in design and production of key technology.

Recent geopolitical tensions have played havoc with electric vehicle battery supply chains in particular, creating challenges amid the race to net zero.

The major funding plan for manufacturing was announced by Chancellor Jeremy Hunt in the autumn statement last week. It comes as the UK seeks to attract investors and firms in a push to capitalise on the growing green economy.

More than £2bn of the fund has been earmarked for the automotive industry, with £975m for aerospace.

The money is intended to support the development of zero-emission vehicles, as well as more energy efficient aircraft equipment.

Ms Badenoch, in a foreword to the plan, appeared to distance the UK from the subsidy-heavy approach taken by the US in the Inflation Reduction Act which has been praised the Labour Party.

“Other countries have embarked on large tax and spending sprees to claim a share of the global manufacturing market. I have been clear throughout that the UK will not be drawn into a distortive subsidy battle,” she said.

“For those of us who believe in the power of the market, the key to unlocking continued growth in our manufacturing industry is capital investment from the private sector, which sustains jobs and growth for the UK.

“No business secretary can pick winners, but government can help companies succeed by removing obstacles in their way and focus on improving the business environment to ensure the sector is competitive.”

The government has nonetheless in recent months handed subsidies to Tata’s battery plant, BMW’s Mini factory and this week to Nissan after the Japanese car giant announced it will build new electric Qashqai and Juke models in the UK.

Prime Minister Rishi Sunak said the new plans would see the government going “full throttle to back British businesses and make the UK a world leader in manufacturing”.

“Today’s plan will not only give the industry the long-term certainty they need to grow and invest further in the UK, but it will also lay the foundations to create more jobs and opportunities for people across the country,” he said.

Firms and investors are set to gather on Monday at a global investment summit at Hampton Court Palace.

The Chancellor used last week’s autumn statement to confirm that a tax break allowing firms to cut their bills if they invest in new equipment will be made permanent, in what he claimed was the “biggest business tax cut in modern history”.

The move was welcomed by firms as the government hopes moves to boost business can help revive the UK’s sluggish growth record.

PA – Dominic McGrath