Fears over cost of UK Brexit deals with OEMs

October 31, 2016

UK politicians will clash in parliament today in a growing row about the promises that are being given to manufacturers to ensure they retain car production facilities in the country after Brexit.

Opposition lawmakers are calling for the release of a letter provided to Nissan in which it is claimed that the government committed to maintaining tariff-free trade between the UK and the European Union (EU).

This reassurance has ensured that the Japanese manufacturer will build its next-generation Qashqai at its car plant in Sunderland and add production of the new X-Trail model. The deal secures more than 7,000 jobs directly and 28,000 more in the supply chain.

The UK business secretary, Greg Clark, told the BBC yesterday: ‘What I said was that our objective would be to ensure that we would have continued access to the markets in Europe - and vice versa - without tariffs and without bureaucratic impediments and that is how we will approach those [Brexit] negotiations.’

In September, Nissan’s chief executive Carlos Ghosn threatened to scrap new investment at its UK factory if it did not get a guarantee of compensation for any tariff-related costs resulting from Brexit, but committed to production after ‘support and reassurances’ following face-to-face meetings with Prime Minister Theresa May.

Critics say that May will maintain the UK’s current trading status with the EU, which would be against the wishes of those who want to see the country agree new trade deals as part of a ‘hard Brexit’.

Remaining part of the EU Customs Union would mean that the UK would be unable to negotiate trade deals independently, since the EU negotiates as a single bloc.

Former UK Prime Minister Tony Blair said on the BBC’s Today Programme: ‘I know the leadership in Nissan and I am absolutely sure they would not have made this commitment unless they had received very strong assurances from the UK government. […] I should imagine they gave strong assurances about the car industry’s access to the single market.’

Sky News’ political editor Faisal Islam agreed, saying: ‘I can tell you that [Theresa May] promised the Nissan boss that the UK would stay in Europe's Common Market.’

There are also unanswered questions about whether compensation will be offered to manufacturers if the UK fails to secure tariff-free access to EU markets.

Ford has argued that any help offered by the UK government to companies that export from the UK to the EU must be applied to all competitors in the industry.

The firm’s European chief John Farley told the BBC: ‘It has got to be something that is not custom-made for each manufacturer. I can imagine that the UK government is looking at the auto sector as a whole.’

His concerns follow similar calls for equality raised by Jaguar Land Rover chief executive Ralf Speth. He told Reuters last month: ‘We are the only car manufacturer in the UK to do all the work in terms of research, design, engineering and production in the UK. We want to have fair treatment and a level playing field at the end of the day.’

The prime minister’s office insists there was ‘no special deal’ given to Nissan ahead of the car plant announcement.

The shadow Brexit secretary, Sir Keir Starmer, said it was ‘extraordinary’ that businesses were hearing more about the UK Government’s Brexit negotiation plans than parliament.

He said: ‘They told Nissan part of the plan and it is in a letter and the sooner we see that letter the better.’

Opposition MPs say they will challenge government ministers on the issue during a debate in parliament today.

The row has undermined the celebrations surrounding Nissan’s announcement and strong car production figures from the UK in the months after the Brexit vote.

Figures from the Society of Motor Manufacturers and Traders (SMMT) for September show UK car production rose almost 1% compared to the same period in 2015.

Domestic demand fell, but this was more than offset by strong exports, which represent more than three quarters of the UK’s output.

Mike Hawes, the SMMTs chief executive, said: ‘UK engine manufacturing continues to benefit from investments made in previous years into new plants and models. […] Exports still account for the majority of engine demand, so it is crucial that government safeguards the conditions that will allow the industry to maintain its international competitiveness.’






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