Eve Preston

Associate Director

A Report On The Unfolding Row Surrounding Nissan And The ‘Brexit Deal’

While recent plans unveiled by Nissan signalled the first major investment in the UK car industry since the Brexit vote in June, the announcement has since been met with considerable controversy amongst those within the industry and in Parliament.

The Announcement

On the 27th October, Japanese carmaker Nissan announced plans to transform its Sunderland factory into a ‘super-plant’. The will would allow for the production of around 600,000 cars a year, as well as safeguarding more than 7,000 jobs and with the possibility of creating many more, following confirmation of government assurances.

The plant, which originally opened in 1986, has since established a further 28,000 supply-chain jobs dependent on the factory, predominantly across the North-East of the country. With Nissan investing more than £3.7bn, almost one in three cars made in Britain in the last year were manufactured in Sunderland, with 80% being exported.

The announcement comes on the back of encouraging indications that the economy is defying the central Brexit fear, that Britain’s economy would be hugely at risk, by performing better than initially anticipated in the immediate aftermath of the vote. Nissan’s decision has been welcomed by many within parliament, with Theresa May describing it as a vote of confidence in Britain, saying: “it is a recognition that the government is committed to creating and supporting the right conditions for the automotive industry so it continues to grow”.

The plans were also well received following previous deliberation in regards to the future of the Sunderland plant post-Brexit, particularly with car industry fears of the prospects of an exit from the single market and the cost of trade tariffs. Nissan’s Chief Executive, Carlos Ghosn, had suggested in September that in order for the company to continue making cars in the UK competitively, it would require compensation for any tax barriers that may be created following the vote. In October, it was Ghosn’s announcement that the decision to continue manufacturing in the UK was motivated by the Government’s ‘support and assurances’ that has been central in sparking the current political and industry backlash.

The Aftermath

Following Nissan’s announcement and claims that the decision was driven by confidence in the Government’s assurances, there have been pressured demands amongst many in parliament for the public disclosure of the letter sent to Nissan by Business Secretary Greg Clark, alongside full details of the associated negotiations.

Scepticism has been voiced across all parties, with former Education Secretary Nicky Morgan and former Shadow Business Secretary Chukka Ummuna requesting the publication of any assurances given and questioning the strength of Nissan’s commitment to remain in the UK. Additionally, whilst Labour’s Shadow Chancellor John McDonnell has welcomed the Nissan news, he described the announcement as a ‘secret deal’ with a chaotic strategy, in need of a more comprehensive plan considering other industries and smaller businesses. The government was similarly criticised by Liberal Democrat leader Tim Farron for making ‘special assurances’ to key manufacturers.

A second area of controversy surrounding the announcement was expressed by Nick Clegg. He raised concerns that the deal based on a government promise to seek continued tariff-free access to EU markets may end up costing the UK tax payer large sums of money. He stated that this was dependent on whether it was part of a “planned strategy with a desired endpoint or a one-off concession which shows that those that shout the loudest get the best deal from ministers”.

In addition, Mike Hawes, Head of the Society of Motor Manufacturers and Traders, raised concerns that rival manufacturers will now seek similar guarantees. Symptomatic of this, Tony Burke, Assistant General Secretary for Unite which is Britain’s largest union, has requested that the government support other carmakers in the UK, as a vital source for “decent jobs, skills and innovation” following Nissan’s lead.

In response to this criticism, the Government has denied suggestions that any special concessions, particularly in the form of additional financial support, were given to Nissan.  Greg Clark reiterated in an interview on the Andrew Marr show that a key objective in Brexit negotiations was to secure continued tariff-free access to the EU market and stated that there was ‘no cheque-book’ involved. His refusal to publish the letter came as a result of sensitive commercial details being included. However, the letter was said to have outlined the governments four-point approach to the automotive industry; a pledge of continued support for the competitiveness of the car industry, an increase in smaller firms being involved in UK supply-chains, the backing of research and development, as well as seeking ‘unencumbered’ trade’.

With rumours that Toyota and Jaguar Land Rover are already involved in similar discussions with the Government on free market access assurances, we are surely only seeing the tip of the iceberg. It seems fair to suggest that the story surrounding Nissan’s decision to remain in the UK will continue to unfold over coming weeks and months, if not years, and likewise for many over other sectors across Britain’s economy.

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