When Nissan said last October that it would build new models at its Sunderland plant, Brexiters were cock-a-hoop. Now the Japanese car maker says it may change its mind if anything changes materially – in particular if its access to the EU market is compromised.

After a series of discussions with the government, Nissan announced that the next Qashqai car as well as a new X-Trail model would be built in Britain. It said this followed the “government’s commitment to ensure that the Sunderland plant remains competitive”.

The prime minister described the announcement as “fantastic news“.

It was never clear what exactly the government had promised the Japanese car maker. It couldn’t, after all, guarantee tariff-free access to the EU market post-Brexit given that this needs to be negotiated with the other 27 countries. Without a special deal, the bloc will impose 10% tariffs on cars after we leave. Meanwhile, any offer of compensation to Nissan in the event that it couldn’t secure a tariff-free deal would contravene EU state aid rules.

It was also hard to see how the government could have guaranteed the car maker that its supply chain – which involves shipping 5 million parts to its plant every day – wouldn’t be disrupted if Britain left the EU’s customs union. One idea doing the rounds at the time was that we might seek special permission for the automotive sector to stay in the customs union, but such selective treatment would breach World Trade Organisation rules.

More recently, May has made clear in her Brexit White Paper that we are leaving the customs union, but will seek to ensure that trade with the EU is “as frictionless as possible”. Unfortunately, trying to make something as frictionless as possible isn’t the same as guaranteeing that it will be totally frictionless.

Unsurprisingly, Nissan is now telegraphing the fact that its commitment to the UK isn’t rock solid. Colin Lawther, a senior vice president, told MPs at the international trade committee today: “We will continually review the decisions that we take based on anything that materially changes.” [View from 10:43

While saying that Nissan was happy at the moment, he said the “big ticket item” that could change its mind was the nature of the trade agreement that Britain made with the EU – adding for good measure that “it’s our duty to our shareholders to review the business situation as circumstances change.” Lawther also said that any disruption to its supply chain would be a “complete disaster”. [View from 11:47]

None of this means that the Japanese car maker will scale down its Sunderland investment. But it does mean its future isn’t in the bag. It also means that the more the prime minister charges down the path of a hard, destructive Brexit, the bigger the risk both to Nissan’s investment and to the economy in general. 

by Hugo Dixon | 28.02.2017

Edited by Luke Lythgoe

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