Business

U.K. offered Brexit assurances and $100 million to Nissan to secure now-scuppered SUV deal

Reuters, Kyodo

The U.K. promised Nissan up to £80 million ($104 million) of support and offered Brexit-related assurances to help secure a major investment from the Japanese carmaker in 2016, according to a well-guarded letter released Monday.

Nissan said in October 2016 that it would build the next generation of its Qashqai and X-Trail sport utility vehicles at its Sunderland plant in northern England, but on Sunday canceled plans to build the X-Trail as diesel sales drop in Europe.

The original decision, which would have created 740 new jobs, was hailed by Prime Minister Theresa May, who had newly taken office at the time, as a major boost to the U.K. as it began the process of extricating itself from the European Union.

But the letter, which the government refused to publish on multiple occasions, had prompted accusations that ministers were doing secretive deals with firms, prompting some Brexiteers to question whether pledges made might keep the U.K. tied to EU mechanisms such as the customs union.

“The government fully recognizes the significance of the EU market to your presence in Sunderland,” business minister Greg Clark wrote to then-Nissan boss Carlos Ghosn.

“It will be a critical priority of our negotiation to support U.K. car manufacturers and ensure that their ability to export to and from the EU is not adversely affected by the U.K.’s future relationship with the EU.

“We will set our ambitions high and vigorously pursue continued access to the European market as an objective in future negotiations.”

The up to £80 million of support for skills, research and development, and innovation, was contingent on the new Qashqai and X-Trail models being built in Britain, Clark wrote.

Clark told Parliament on Monday that as the terms of Nissan’s investment had changed, they would need to re-apply for the funding. He said that of the £61 million worth of grants which had already been approved, only £2.6 million had so far been paid to Nissan.

Nissan, which builds 30 percent of the U.K’s 1.52 million cars at its factory, the country’s biggest car plant, exports the vast majority of the vehicles to EU countries and, like the rest of the industry, is worried about tariffs if there is a no-deal Brexit.

Nissan had announced its plan to build new SUV models at the Sunderland plant about a week after Clark’s letter was sent.

But the company said Sunday the X-Trail for the European market will be produced in its Kyushu plant in Fukuoka Prefecture, citing “the continued uncertainty around the U.K.’s future relationship with the EU.”

“The letter, written in October 2016, shows Nissan and the U.K. government’s continued desire to support investment in the U.K. and maintain Sunderland as one of Nissan’s manufacturing hubs in Europe,” the company said Monday.

The continued uncertainty over Brexit “is not helping companies like ours to plan for the future,” said Nissan Europe Chairman Gianluca de Ficchy.

The firm will still build its new Juke and Qashqai models at the factory, which opened in 1986 after then-Prime Minister Margaret Thatcher successfully encouraged Japanese companies to pick the country as a gateway into Europe. Brexit uncertainty has since prompted consternation in some boardrooms in Tokyo.

On Feb. 1, an EU-Japan free trade agreement also kicked in, which includes the EU’s commitment to removing tariffs of 10 percent on imported Japanese cars, diminishing part of the business case for building in Europe.

Union representatives met Nissan representatives Monday and said they will push to secure the future of the site.

“Unite will continue to press for further long-term guarantees over future investment and new models to secure the site’s future for generations to come,” said Steve Bush, acting national officer for the automotive sector.