Nissan requests £100m ‘Made in Britain’ supplier fund, could face £400-plus million profit hit

March 02, 2017

Nissan warns it could take a £400-600 million (€465-700 million) hit to profit should the UK fail to reach a deal with the EU and then revert to World Trade Organisation (WTO) rules. It calls for a £100 million (€117 million) supplier fund to counter the British automotive industry’s overreliance on EU-sourced components. 

This is the first time Nissan has put an estimate on Brexit-related costs, with Colin Lawther, Senior Vice President, telling the UK’s House of Commons ‘you’re talking a £400, £500, £600 million impact’ and that a 10% tariff on its exported vehicles built at its Sunderland plant, plus a 2.5-4.5% tariff on parts, would be ‘pretty disastrous’. He said that the company would have to absorb some of the impact, and that while the plant – the fifth most productive in the world – would still be profitable under WTO rules, long-term it would have to reassess the attractiveness of the UK under such cost conditions. Nissan said it may ‘adjust’ its British business depending on the outcome of British negotiations with the EU. 

This year, Nissan intends to produce 320,000 Qashqai SUVs at Sunderland – its best-selling model in Europe – with 60% exported to EU member states. If it were subject to WTO rules, the plant would undergo  efficiency savings and a potential ‘on-shoring’ of suppliers. 

To this end, Nissan has called on the UK government to establish a £100 million (€117 million) ‘Made in Britain’ fund to attract component suppliers to the UK. Lawther said around £40 million (€47 million) should be spent in the North East of England to attract suppliers to Nissan. Its gigantic Sunderland plant currently builds the Qashqai, Juke, Note, Leaf, Infiniti Q30 and Infiniti QX30, and is set to get the next X-Trail and Qashqai models  

The Qashqai and X-Trail pledges came after the UK offered assurances to Nissan (and later to all manufacturers), based on four key commitments. Boosting UK component manufacturing was one of these, alongside increasing competitiveness, R&D and training. Currently, the British car industry is too reliant on components from the EU, with only an average of 41% of components sourced in the UK. To comply with WTO ‘rules of origin’ if the UK leaves the EU’s customs union, this figure needs to rise to 50-55% in order to gain an EU tariff preference. This would leave UK plants less vulnerable to fluctuations in exchange rates, by increasing the amount of sterling content in the vehicles. However, increasing the number of domestic suppliers by boosting their competitiveness would not be a quick process. 

Lawther said: ‘This is critical. If we don’t really invest in the supply base it will be a house of cards effect. […] Nissan will not succeed in the future, with or without Brexit, unless the government does something to help us in the supply chain. 

Nissan is not alone in wanting to boost the UK supply chain. The SMMT, the UK auto industry lobby, has joined a consortium alongside the aerospace and railway industries, to call on the government to allocate more than £120 million (€140 million) in the upcoming March Budget to support growth in the UK supply base. Lawther said: ‘[The current] UK supply base is not competitive globally,’ so manufacturers instead often source parts overseas. 

Nissan itself plans to almost double the £2.5 billion (€2.9 billion) it currently spends on UK-sourced parts, with an additional £2 billion (€2.3 billion) spend on UK suppliers.

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