Carmaker says success of Sunderland operations enabled by frictionless trade with EU
The
Japanese carmaker
Nissan has warned the government that serious disruption will be caused to its huge manufacturing operation in the north-east of
England if the
UK fails to secure a deal with the EU that avoids a hard
Brexit.
Carlos Ghosn, the chair of Nissan, has described its British operations as “a European investment based in the UK”, which employs almost 8,000 people, mostly at its factory near Sunderland. A further 30,000 people are employed in UK companies supplying Nissan.
Like the other car manufacturers that use the UK as a base for exporting to the EU, Nissan relies on rapid, “just in time” importing of millions of components from the EU every day, with no customs delays or tariffs.
A hard Brexit – if the government has not agreed to a customs union or common standards to allow free movement of goods – would result in trading with EU countries on World Trade Organization rules, which apply 4.5% tariffs to car parts and 10% to finished cars.
Colin Lawther, a Nissan executive, told the House of Commons international trade committee in February 2017 that tariffs would add £500m to the plant’s costs, which it might not survive, and that long delays of parts at borders would be a disaster for the operation.
In a statement to the Guardian authorised by the main board in Japan, Nissan said: “Since 1986, the UK has been a production base for Nissan in Europe. Our British-based research and development and design teams support the development of products made in Sunderland, specifically for the European market.
“Frictionless trade has enabled the growth that has seen our Sunderland plant become the biggest factory in the history of the UK car industry, exporting more than half of its production to the EU.
“Today we are among those companies with major investments in the UK who are still waiting for clarity on what the future trading relationship between the UK and the EU will look like. As a sudden change from those rules to the rules of the World Trading Organization will have serious implications for British industry, we urge UK and EU negotiators to work collaboratively towards an orderly balanced Brexit that will continue to encourage mutually beneficial trade.”
It is a sign of alarm at senior levels that Nissan has issued a statement, as the company has been restrained in public since the June 2016 referendum. Ghosn himself has issued repeated warnings that investment is on hold, saying in June this year that over the long term the Sunderland operation is threatened with decline .
In September 2016 he stated that the new Qashqai and X-Trail models which were due to be allocated to the Sunderland plant were on hold. Theresa May and the business secretary, Greg Clark, then met Ghosn and other Nissan executives to give assurances of financial support for the car industry, and for the strengthening of Nissan’s UK supply chain, which led to the new models being commissioned at Sunderland.
Shinichi Iida, minister for public diplomacy and media at the Japanese embassy in London, also told the Guardian that Japanese companies, of which there are 1,000 in Britain employing 160,000 people directly, are responding to Brexit by taking “risk hedge measures”.
Japanese financial institutions have already submitted applications to set up bases in European financial authorities such as Frankfurt and Amsterdam, he said, and some manufacturing companies are holding off future investment plans.
“If Japanese companies encounter problems in the UK I would not be surprised if they shift their balance towards their business operations on the continent,” Iida said.
Senior executives at Toyota, BMW and the PSA Group, which owns Vauxhall, have all warned this week that they are likely to reduce their operations in the UK in the event of a hard Brexit. In September Ralf Speth, chief executive of Jaguar Land Rover, warned the prime minister that its operations faced grinding to a halt and that “tens of thousands” of jobs in the industry could be lost.