Blog: Possibility of hard Brexit empowers Nissan to make bold requests of British government

A Nissan Juke is prepared for wiring in Sunderland, England. Despite receiving nearly 1 billion GBP in corporate welfare over the years, Nissan UK is threatening to leave the UK if the government does not compensate any Brexit-related costs.
One of the first stages after the body is assembled is to fit the wiring loom, at the Nissan factory in Sunderland, North East England, 2010. (i am dabe/flickr)

In February 2017, Colin Lawther, senior vice president for manufacturing and purchasing for Nissan UK, gave evidence to the House of Commons International Trade Committee, explaining that the UK leaving the EU without an adequate trade deal in place could cost Nissan’s UK operations half a billion pounds per year. He went on to suggest that the company would not be able to bear all of the additional risks and costs, and that additional support measures were required to keep production and investment in the UK. Lawther also confirmed that Nissan had in 2016 received certain, as yet undisclosed offers of help and support from the UK government, including a grant to support new investment.

This grant would add to the tally of support received by the company between 1984 and 2016 in the form of loans, subsidies for research and development, and capital grants and other support – including the substantially discounted rate at which Nissan initially purchased the land for the Sunderland plant. In total, we estimate that the government has handed over more than £780 million to Nissan’s UK operations.

Government Seems Keen to Appease Nissan

The UK government will clearly do all it can to keep Nissan’s investment and jobs in Sunderland and it will have to do so in the face of fierce competition from the remaining 27 countries of the European Union. In October 2016, Carlos Ghosn, CEO of Nissan, met with Prime Minister Theresa May at Downing Street. This meeting followed Ghosn’s public call for the government to “compensate” UK car makers who would face post-Brexit trade tariffs if the UK fails to strike a trade deal with the EU during the Brexit process. The meeting with PM May would seem to have assuaged Ghosn’s concerns because just two weeks later Nissan announced that it would not only continue its Sunderland operations but expand them.

Requests made by Nissan in an October 2016 letter to business secretary Greg Clark, obtained by and reported on by The Times in May 2017, are reflected in government grants given since that time. As Sam Coates for The Times points out, Paul Wilcox, chairman of Nissan Europe drew attention in the letter to a project to give a second life to Nissan car batteries for electricity storage use in private homes. In March 2017, Innovate UK granted nearly £400,000 to a company called Powervault to do just that — in partnership with Nissan.

Wilcox also stated in the letter other “immediate tangible requests” with which Nissan hoped the government could assist. These included funds to promote the use of electric vehicles and for investment in infrastructure in support of this. Subsequently, a series of announcements from the Office for Low Emission Vehicles outlined plans to fund projects in this vein. One scheme, valued at more than £109 million and announced in April 2017, includes funding for projects that “address gaps in and strengthen the UK supply chain” for driverless and low-carbon vehicles. This particular strand of funding echoes a further demand made by Nissan’s head of European manufacturing, Colin Lawther, that the UK government create a £100 million fund to support the development of an automotive supply chain to support Nissan’s operations. (Lawther described this request in his February 2017 testimony before the House of Commons International Trade Committee.)

What to Expect After Brexit

If recent history is any indicator, we can expect that the UK government will continue to meet Nissan’s requests for funding for its operations and for investment within the greater automotive industry and related infrastructure. This will happen because the threat of Nissan leaving is real. Already the company has manufacturing operations in Spain and as Mike Kelly for ChronicleLive reports, newly-elected French president Emmanuel Macron supports a hard Brexit and will advocate for the UK to lose its access to the single market. (Kelly also reports that the French government owns a 20 percent stake in Nissan.) So, the most likely two scenarios are that in the aftermath of Brexit, 1. Nissan shutters its Sunderland plant and expands its European operations to maintain a tariff-free relationship with both suppliers and consumers on the Continent or 2. the UK government compensates Nissan, in one or a variety of forms, for profit losses the company will incur once the UK leaves the single market.

So will the government compensate Nissan to the tune of half a billion pounds per year? Through a combination of reductions in corporate tax, support for R&D and other grants, and investment in companies and infrastructure that support Nissan’s sales and profits, they just may — regardless of who is in charge.