Despite warnings to the contrary during the EU referendum campaign, Nissan delivered some good news last week. In a surprise announcement, it has emerged that the new model of Qashqai will continue to be produced at its Sunderland plant from 2019, along with the first X-Trail model to be built outside of Japan. The decision directly secures 7000 jobs on the site, plus an estimated 28,000 further along the supply chain.
Scepticism was widespread following a meeting between PM Theresa May and Carlos Ghosn (Nissan worldwide Chairman and CEO), with Lord Shipley (Liberal Democrat, and former leader of Newcastle City Council) declaring: “I don’t believe that an agreement was cobbled together yesterday at Downing Street about Nissan’s future”.
“The support and assurances of the UK government enabled us to decide that the next-generation Qashqai and X-Trail will be produced at Sunderland. I welcome British Prime Minister Theresa May’s commitment to the automotive industry in Britain and to the development of an overall industrial strategy.”
Carlos Ghosn – CEO, Nissan
Ghosn had previously suggested that Nissan would only remain at Sunderland if it received financial compensation for any tariffs following Brexit; there was therefore significant speculation following the announcement that the decision had been driven by an offer of government subsidies. Ministers avoided clarification on the subject for some time, like so much relating to our exit from the EU, however Nissan insisted they had received nothing inaccessible to the wider industry.
“There’s no special deal for Nissan, we’re working within the whole of the automotive industry, so we’d expect nothing for us that the rest of the industry wouldn’t be able to have access to.”
Colin Lawther – Senior VP Manufacturing, Nissan Europe
Finally appearing on the Andrew Marr Show, Greg Clark (Secretary of State for Business) gave a refreshingly frank account of the Nissan agreement, and a small insight into the development of the government’s Brexit negotiating position. Prior to this, the agreement had been condemned by some, under the assumption that state aid had indeed been promised. Clark argued conversely that “if we were sitting here today discussing how we’d let it slip through our fingers… you’d quite rightly feel that I hadn’t been active enough”.
Compensation for tariffs would actually breach the World Trade Organisation Agreement on Subsidies, and so it was in fact made clear that ‘assurances’ does not mean extra public money for Nissan, but that four key areas applying to the industry in general had been addressed. The first is a potential increase in current funding for training and skills, which is available to all companies through a competitive and independently assessed application process.
The second is a commitment to the regeneration of sites along the supply chain, helping small and medium sized businesses to repatriate the production of components from overseas; “there is a joint initiative with the industry to bring them home”. In the past, this would have been simple protectionism, but with the devaluation of the Pound and the potential for trade tariffs, the comparative advantage shifts toward domestic production.
Third is a greater national focus on research and development, with a commitment to be “at the leading edge” in technology and science. Companies will be able to make use of “our leadership in renewable energy paired with our leadership in automotive”, capitalising on the rapid progress of electric vehicles (such as the Nissan Leaf, also currently produced at Sunderland).
Last, understanding that we can’t know the final outcome of negotiations with the EU, the government will commit to the development of an ‘industrial strategy’ to conserve the competitiveness of UK industry, whatever happens. The first intent in negotiations, however, “is to have a constructive and civilised dialogue to look for the common interest”. In this case, that there is significant exporting both ways, with deeply integrated supply chains.
“It’s my job to provide the assurances to Nissan and to other investors that Britain is going to continue to be a great place to invest in the future. I was able to do that, and this was the result that we saw announced this week.”
Greg Clark MP
Seemingly evident is that the government’s aims for Brexit negotiations are still being developed in the run up to the trigger of Article 50. This is understandable, given the magnitude of the decisions and the differences of opinion running right up to Cabinet. Nevertheless, it will be essential for the sake of stability that there is some extent of public clarity once negotiations begin.
It is important to consider all possibilities in negotiations, and not to preclude any option based on ideological obsessions, especially when it comes to the Single Market. Discussion with businesses and investors can inform our aims for negotiation, especially given the varied needs of our diverse economy. While industry is the current focus, financial services are invaluable and have very different requirements, likewise in the creative sector with our booming film industry.
“It’s been my experience that talking to people face-to-face, and communicating the seriousness of your intent, is important to any discussion, any negotiation; that was what I was able to lay out.”
Greg Clark MP
Recognition of this positive development is worthwhile, but it is also important to remember that securing the investment required government intervention, rather than coming purely from the free market: a sign of the instability caused by the Brexit vote. We can’t rely on these tactics as a universal solution should similar problems arise in future, although the massive scale of this deal could stabilise wider investment, potentially eliminating the need for further intervention. Had we not decided to leave the EU, these problems would not have arisen in the first place.
Andrew Bulman 