India's Tata is expected to announce on Wednesday that it has chosen to build an electric vehicle battery plant in Britain, a source familiar with the matter said, a win for the country's automotive industry amid stiff global competition.

Tata had been choosing between a site in Somerset, southwest England, and one in Spain to supply a new range of electric Jaguar and Land Rover vehicles.

A government spokesperson declined to comment on ongoing commercial negotiations, while Tata declined to comment on the report. Bloomberg was first to report on Tuesday that the factory was set to be announced this week.

There have been months of speculation around where Tata, a conglomerate with interests in software, steel, cars and airlines, would build the factory.

The plant would be a major win for Britain, which is trying to catch up in the global race to build electric vehicle (EV) battery capacity locally - vital for automakers which rely on heavy batteries being built near their car factories.

Britain has expressed concerns at the U.S.'s Inflation Reduction Act, which promises hundreds of billions of dollars of subsidies to green industries, with finance minister Jeremy Hunt saying the government did not have large sums of money for similar measures.

Homegrown battery production will also help British automakers comply with post-Brexit trade rules that will require them to source more electric vehicle components locally in order to avoid tariffs on UK-EU trade from 2024.

The government has previously said it was in talks with the EU over easing those rules, after a warning from car giant Stellantis that it would be forced to shut factories with the loss of thousands of jobs were it to face tariffs.

The BBC said the government would provide subsidies worth hundreds of millions of pounds to Tata.

"The decision by JLR to invest in battery production in the UK is very welcome. We will want to reflect, however, on the subsidy package that was required to secure this decision," Darren Jones, chair of parliament's business committee, said.

Tata's choice of Britain would also provide a boost for Prime Minister Rishi Sunak's government, which has pledged to grow the economy and outlined a series of net zero goals including a ban on the sale of new petrol and diesel cars from 2030.

The proposed site is owned by Salamanca Group, a privately held merchant banking business. The group did not comment when contacted by Reuters.

(Reporting by Muvija M and Alistair Smout in London; Additional reporting by Chandni Shah in Bengaluru; Editing by William James, Josie Kao and Jan Harvey)