Nissan Investment Raises More Questions Than Answers

During the referendum campaign, Boris Johnson said several times that his policy on cake was “pro having it and pro eating it”.

Nissan

He meant that Britain could continue to have the best of both worlds after leaving the EU – control over its borders and access to the EU’s single market.

The jury may be out on that one, but the voters of Sunderland must definitely feel they are both having their cake and eating it.

The Wearside city’s stunning 61% vote to leave the EU was the first signal, on the night of 23 June, that Britain was about to be struck by a political earthquake.

Yet many of those Mackems who voted Leave were shortly after wondering whether many of their own would soon live to regret their decision once Nissan, the city’s major employer, indicated Brexit would make it think twice about committing to build the new Qashqai model in Sunderland.

Today, though, those fears were laid to rest. Not only will Nissan build the new Qashqai in Sunderland, it will also build the new X-Trail SUV there, securing some 7,000 jobs at the plant and a further 28,000 in the supply chain.

The big question is what blandishments Theresa May, who recently hosted Carlos Ghosn, the Nissan chief executive, at 10 Downing Street, will have thrown at the Japanese car-making giant to get it to make this commitment.

Mr Ghosn himself said this morning that “the support and assurances of the UK government” convinced the company to do so.

With four in every five cars produced at Nissan destined for the export market, mainly the rest of the EU, the company could potentially be looking at export tariffs of 10% once Britain leaves the bloc. Mrs May has promised to protect Nissan from that.

But how? Both 10 Downing Street and Nissan have insisted there has been no sweetheart deal and there is certainly good reason to believe that there has been no financial lob to Nissan.

That is because even after the UK leaves the EU and is no longer subject to EU state aid rules, it will still be subject to the rules of the World Trade Organisation, which explicitly rules out export subsidies.

So, had Mrs May promised financial support to Nissan to mitigate the impact of any tariffs post-Brexit, that would have amounted to an illegal subsidy, unless Mrs May had offered similar ‘assurances’ to every other foreign-owned carmaker operating in the UK – and, who knows, perhaps every other exporter who faces tariffs on their products once Britain has left the EU.

There are other ways in which financial incentives could have been provided to Nissan without breaking the rules, though, such as training grants, improving the road connectivity to and from the factory – something that is already happening – and providing grants to make the plant more environmentally friendly, which Sunderland City Council has been doing. That would obviate the need for an explicit financial lob.

The alternative is that Mrs May has given Mr Ghosn assurances that Britain will remain in the EU’s single market or customs union once it has left the EU.

It is hard to see how she could have promised the former as the PM has insisted she is prepared to sacrifice membership of the single market if that is the price for regaining control of Britain’s borders.

So, has she promised him Britain will retain a customs union agreement? That is perfectly possible. The plant is not due to begin production until around 2019 – just when Britain, assuming Article 50 of the Lisbon Treaty is triggered next spring, is due to leave the EU.

If Britain was to remain in the customs union for a period after leaving the EU, that would give ministers time to cobble together free trade agreements with the EU in items like cars for an interim period, something the EU might accept as the UK is the number one export market for German cars.

Yet Mr Ghosn is a hard-nosed businessman. He will have needed pretty strong convincing.

The truth of the matter is that we just do not know what ‘assurances’ have been given by the UK government to Nissan. What we do know is that other carmakers, such as Vauxhall and Toyota, both of whom are poised to make similar investment decisions, will be beating a path to Number 10 to demand similar treatment.

So this announcement raises far more questions than answers. And when the truth emerges, if it turns out that public money is being used to preserve the jobs of those who voted to leave the EU, it may well antagonise those taxpayers who voted Remain and who may lose their jobs as a result of the decision to leave the EU.

About the Author