Nissan asks for £100m supplier fund to safeguard UK auto industry

Colin Lawther, head of Nissan Europe discussed the company's negotiations with UK government over Brexit-related compensation. He wants a 100 million GBP supplier fund to support Nissan UK.

The head of European manufacturing at Nissan has given evidence to the International Trade committee this week. It provides a glimpse into the way in which Brexit will divert energy and resources to the largest corporations. Our Nissan Company Report illustrates that Nissan UK is already one of the major beneficiaries of government subsidies. Unlike other similar companies, Nissan at least acknowledges some of the support it receives from the taxpayer:

From Nissan’s point of view we are working with the Highways Agency, Automotive Investment Organisation, South Tyneside, Sunderland City Council, [to bulid] an international advanced manufacturing park.  All of those organization have done great work in improving the road structure, taking land out of green belt, giving it Enterprise Zone status . . . providing the canvas to allow suppliers to come to help us with a vision of suppliers next to the plant to build a customer order to really add value. . . .

Such help clearly goes beyond cash-based support; it extends to changing planning laws and expanding into previously protected natural environments.

During his evidence to the committee, Colin Lawther revealed that the ‘letter’ of understanding received from the UK government in the wake of Nissan’s threat to reduce its investment was commercially sensitive in that it disclosed details of a potential award from the government’s Growth Fund. Mr Lawther stated that:

One of the elements of the letter is governmental support to Nissan . . . relating to competitiveness enhancement of the plant….  The plant is one of the best in the world. . . The ask that we made of the government in terms of competitiveness support would have been exactly the same pre and post-brexit vote. So we were already putting forward things we needed to receive support from the government to improve our competitveness. Those strategies are commercially sensitive. . .

Asked whether the letter contains a commitment to “some sort of government grant” Mr Lawther replied “correct.”

During the session, Colin Lawther stated that:

We believe that we have to have a competitive business. And a business that is propped up by grants or incentives is not a sustainable business.  So it’s not a money question. [Carols Ghosn] was talking about compensatory measures so tax measures or infrastructure measures of competitive measures…

When asked by the committee Chair, whether ‘compensation’ could include lower corporation tax, he replied:

Could be… [Could include] a whole bundle of solutions. The government will need to come up with a lot of different solutions…  so free import duty… for example. An automotive-specific trade deal would be another example.

The biggest demand made by Colin Lawther wasn’t the compensatory changes to taxes and taxpayer-backed investment, however. Nissan’s biggest demand was that the government provide £100m worth of new investment to support the development of a new supply-chain in the UK.

For Nissan only, the Chief Executive of Sunderland City Council has written to the Secretary of State for Business and the Chancellor that she believes, obviously we are party to that, round about £100m overall UK fund . . . We have enough suppliers interested in coming from overseas to the UK, and those in the UK who want to consolidate and expand their businesses.. To give us the flexibility to be in charge of our own destiny.

This would have the advantage of offsetting the costs of any future tariffs since, at the moment, Nissan sources such goods from overseas.  Mr Lawther didn’t mince his words:

By far the most important going forward. . . I do believe the government is underfunding and I believe there should be more assistance in the supply chain. . . The supply base in the UK is not competitive. . . Nissan will not succeed in future unless the government does something to help  our supply chain.

This (£100m investment) is critical. If we don’t really invest in the supply base it will be a house of cards effect

All we have agreed with the government that they will provide a competitive landscape for us to trade in.