Car manufacturing in Britain has been going through a difficult patch but Nissan’s decision to withdraw its investment in the north east of England could be seen as an important milestone in determining more than where its next model is built.
Already there has been an 80% drop in investment in the industry in the last three years as the sector adjusts to the decline in demand for diesel cars, down 18% last year and 30% in the UK. While the control of emissions in the EU is a key factor in Nissan retaining production of the X-Trail in Japan, the company has referred to “Brexit uncertainty” as a contributory reason for pulling its investment in Britain.
There will be no job losses as a result of this announcement, but the new jobs expected will not materialise. Its original plan, announced in 2016, was seen as a big vote of confidence in post-Brexit Britain. Reversing the decision is a big warning to Britain of what may lie ahead, particularly if no deal is reached.
X-Trails will now be exported to Europe under the recently struck EU-Japan trade deal which allows cars to be sold here under low tariffs. With the collapse in diesel sales there are doubts about the volume of exports Nissan will achieve, but the existence of this trade deal does present the UK with a challenge. It took the EU and Japan almost a decade to reach this agreement, giving an indication of what Britain faces in drawing up similar deals.
Furthermore, the Japanese car makers have been encouraged to invest in Britain because of its membership of the single market. With that arrangement now unlikely to continue they may choose to switch investment in Europe to other countries. Nissan, after all, is owned by Renault and the French would welcome it with open arms.
The Qashqai remains the key model for Sunderland and for the time being the plant looks secure. However, big manufacturing plants need forward investment to plan for the production cycle. This decision leaves a potential gap in that cycle that will spread nervousness across the supply chain.